(Bloomberg News) Confidence among U.S. consumers unexpectedly dropped in March as this year's 17 percent jump in gasoline prices threatens to squeeze household budgets.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 74.3, the lowest this year, from 75.3 the prior month. The gauge was projected to rise to 76, according to the median forecast of 70 economists surveyed by Bloomberg News. A government report today showed that consumer prices rose in February by the most in 10 months, with gasoline accounting for 80 percent of the increase.

The sentiment gauge contrasts with the Bloomberg Consumer Comfort Index, which climbed last week to the highest level since 2008. Reports this week showed claims for unemployment benefits declined, matching a four-year low, and retail sales rose in February by the most in five months, indicating households are weathering the increase in fuel costs.

"The rise in gasoline prices appears to be a worry but not a game-changer yet," said Michael Gapen, a senior U.S. economist at Barclays Capital Inc. in New York, who predicted the sentiment index would drop to 74. "Households are saying 'yes, gasoline takes a bit out of my pocket, but other energy costs are lower, and the labor market looks better so incomes will rise.'"

Stocks held gains after the reports. The Standard & Poor's 500 Index rose 0.2 percent to 1,404.65 at 12:21 p.m. in New York. The yield on the 10-year Treasury note climbed to 2.31 percent from 2.28 percent late yesterday.

Economist Estimates

Estimates for the confidence measure ranged from 72.5 to 78.5, according to the Bloomberg survey. The index averaged 64.2 during the last recession and 89 in the five years before the 18-month slump that ended in June 2009.

The consumer-price index climbed 0.4 percent in February, matching the median forecast of economists surveyed by Bloomberg, after increasing 0.2 percent the prior month, figures from the Labor Department showed today. The so-called core measure, which excludes more volatile food and energy costs, advanced 0.1 percent, less than projected.

Americans are growing more concerned about the rising cost of living, today's confidence survey showed. Consumers said they expect an inflation rate of 4 percent over the next 12 months, the highest since May, compared with 3.3 percent in the prior survey.

Fuel costs may be the culprit. The average price of a gallon of regular gasoline at the pump rose to $3.83 on March 15, the most since May, according to AAA, the nation's biggest motoring organization.