(Bloomberg News) Confidence among U.S. consumers dropped more than forecast in March as fuel costs surged to the highest level in more than two years.

The Conference Board's confidence index fell to a three-month low of 63.4 from a revised 72 reading in February, figures from the New York-based private research group showed today. The median forecast of economists surveyed by Bloomberg News called for a drop this month to 65.

Sentiment may remain suppressed as higher prices at service stations and supermarkets take a bigger bite out of Americans' incomes. A pickup in the job market and savings from tax cuts make it less likely that household spending, which accounts for about 70% of the economy, will falter.

"Higher prices at the gas pump and at the grocery store have rattled consumers," said Tim Quinlan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who forecast a confidence reading of 63.5. Still, "we're shifting into substantial job growth and we see the unemployment rate trending down."

Americans' inflation expectations for the next 12 months jumped to 6.7% in March, the highest since October 2008, today's Conference Board data showed.

A separate report today showed home prices fell in January by the most in a year, raising the risk that home sales will keep slowing. The S&P/Case-Shiller index of property values in 20 cities fell 3.1% from January 2010, the biggest year- over-year decrease since December 2009, the group said today in New York.

Stocks, Treasuries

Stocks and Treasuries were little changed after the reports. The Standard & Poor's 500 Index rose 0.1% to 1,311.7 at 10:32 a.m. in New York. The yield on the benchmark 10-year note was 3.45%.

Estimates for consumer confidence ranged from 59 to 73.5 in the Bloomberg survey of 69 economists. The measure averaged 98 during the expansion that ended in December 2007.

The group's measure of present conditions increased to 36.9, the highest since November 2008, from 33.8 a month earlier. The gauge rose as 15.1% viewed current business conditions as being "good," up from 12.4% a month earlier.