New U.S. economic reports show prices declining, consumer confidence rising, and the battered factory sector shrinking more slowly.

Friday's Labor Department report said the cost of living in the United States dropped by the largest amount in half a century in the 12-month period ending in April.

While consumers welcomed these price declines, a long-term, self-reinforcing fall in prices called "deflation" could further slow the economy by giving consumers an incentive to delay purchases. While some experts worry about deflation, many think action by the U.S. central bank is likely to prevent the problem.

A report by the University of Michigan on how U.S. consumer view the economy shows them growing less pessimistic. Their gauge of consumer sentiment rose 2.8 percentage points to a reading of 67.9. Experts track consumer confidence for clues about consumer demand, which drives two-thirds of U.S. economic activity.

Two reports on manufacturing show the battered factory sector still shrinking, but at a slower pace than the previous month. 


Some information for this report was provided by Bloomberg, AP and Reuters.