By Shobhana Chandra Nov. 13 (Bloomberg) -- Confidence among U.S. consumers unexpectedly fell in November for the second consecutive month as surging unemployment shook households. The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 66 from 70.6 in October. The gauge was projected to rise, according to the median forecast in a Bloomberg News survey of economists. A jobless rate that jumped to a 26-year high last month and is projected to remain above 10 percent through the first half of next year is weighing on Americans as they head into the holiday shopping season. Macy’s Inc. is among retailers showing a decline in sales as consumers spend only on essentials such as food and clothing. “People are extremely concerned about their jobs and incomes,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, who had forecast a decline. “We’ll be losing jobs until the middle of next year, though at slower pace. Consumer spending is going to be subdued and we’ll have a fairly lackluster holiday season.” Stocks trimmed gains following the report. The Standard & Poor’s 500 Index was up 0.4 percent to 1,091.01 at 10:25 a.m. in New York. Lower Than Forecast The sentiment index was forecast to rise to 71, according to the median of 69 economists surveyed by Bloomberg. Estimates ranged from 67.5 to 75. During the expansion that began in late 2001 and ended in December 2007, the index averaged 89.2. A report from the Commerce Department today showed the trade deficit widened by 18 percent in September, the most in a decade, reflecting rising demand for imported oil and automobiles as the economy rebounded. The gap grew to $36.5 billion, larger than anticipated and the highest level since January. Imports surged by the most in 16 years, swamping a gain in exports. The gauge of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, decreased to 69.6 from 73.7. The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, dropped to 63.7 from 68.6. Consumers in the survey said they expect an inflation rate of 2.8 percent over the next 12 months, compared with 2.9 percent in the prior survey. Higher Prices Over the next five years, the figures tracked by Federal Reserve policy makers, Americans expected a 3.1 percent rate of inflation, compared with their 2.9 percent forecast last month. The preliminary Reuters/University of Michigan consumer confidence report reflects about 300 responses, compared with 500 households for the final survey. The labor market will take time to heal. The economy has lost 7.3 million jobs since the recession began in December 2007. Payrolls fell by 190,000 last month, and the unemployment rate jumped to 10.2 percent, the highest level since 1983. Economists surveyed by Bloomberg predict the rate may stay above 10 percent through the first half of 2010. The lack of jobs means consumer spending, after putting in its best performance in more than two years in the third quarter, will cool in the last three months of 2009 and be slow to recover, according to the Bloomberg survey taken this month. Macy’s, the second-biggest U.S. department-store chain, is among retailers more cautious as consumers hold back on discretionary purchases. The Cincinnati-based chain reported a third-quarter loss as sales fell. “As we look to the fourth quarter, we are cautiously optimistic,” Chief Financial Officer Karen Hoguet said on a conference call with analysts and investors on Nov. 11. “There is more uncertainty than usual in the environment.” Yet a revival in manufacturing, business investment and exports signals growth will be stronger over coming quarters than previously anticipated, economists surveyed said. To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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