UPDATE 1-U.S. consumer sentiment hits year low in January
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NEW YORK, Jan 18 (Reuters) - U.S. consumer sentiment unexpectedly deteriorated for a second straight month to its lowest in over a year in January, with many consumers citing the recent "fiscal cliff" debate in Washington, a survey released on Friday showed.
The sharp drop in sentiment over the last two months coincides with rancorous federal budget negotiations that have led to higher taxes for many Americans.
Just weeks after that deal, President Barack Obama and Republican lawmakers are expected to enter another tough round of negotiations over spending cuts, which could dent consumer confidence still further.
"The most unique aspect of the early January data was that an all-time record number of consumers - 35 percent - negatively referred to the fiscal cliff negotiations," survey director Richard Curtin said in a statement.
"Importantly, the debt ceiling debate is still upcoming and could further weaken confidence," he said.
The Thomson Reuters/University of Michigan's preliminary reading on the overall index of consumer sentiment came in at 71.3, down from 72.9 the month before. The index was at its lowest since December 2011.
It was also below the median forecast of 75 among economists polled by Reuters.
"It's a January figure, therefore it's more important than those from other months because we are curious to know what the impact on consumers will be from the hike in the social security tax. That is undoubtedly going to hit discretionary spending. So this may be a signal of things to come," said Michael Woolfolk, a senior currency strategist at BNY Mellon in New York.
U.S. stocks remained little changed after the data. The S&P 500 hit a five-year high in the last session and on Friday, a weak outlook from Intel offset encouraging data out of China and a fourth-quarter profit at Morgan Stanley .
The consumer survey's barometer of current economic conditions fell to 84.8 from 87.0 and was below a forecast of 88.0. The gauge hit its lowest since July.
The survey's gauge of consumer expectations also slipped, hitting its lowest since November 2011 at 62.7 from 63.8, and was below an expected 65.2.
The survey's one-year inflation expectations rose to 3.4 percent from 3.2 percent, while the survey's five-to-10-year inflation outlook was at unchanged at 2.9 percent.
(Reporting by Edward Krudy; Editing by Chizu Nomiyama)