Nov. 13 (Bloomberg) -- Confidence among U.S. consumers unexpectedly dropped in November as the loss of jobs threatened to undermine the biggest part of the economy.

The Reuters/University of Michigan preliminary sentiment index decreased to a three-month low of 66 from 70.6 in October. A report from the Commerce Department showed the trade deficit widened in September by the most in a decade as rising demand for imported oil and automobiles swamped a fifth consecutive gain in exports.

Rising joblessness puts the economy at risk of slipping into a vicious circle of firings and declines in consumer spending that will limit the emerging recovery. The dollar’s 12 percent decline since March and growing demand from Asia and Europe will probably spur exports further, giving factories a lift and making up for some of the weakness among households.

“Consumers face a lot of headwinds, and rising unemployment is the No. 1 worry,” said David Sloan, a senior economist at 4Cast Inc. in New York, whose forecast for confidence was the lowest of economists surveyed. “The recovery, in its early stages, will be led by increases in manufacturing rather than by consumers. Markets in Asia are rebounding quite nicely.”

The U.S. trade gap widened 18 percent to the highest level since January, the Commerce Department said. Imports rose 5.8 percent, the most since March 1993, as the cost of a barrel of crude climbed to the highest level since October 2008 and volumes also rose. Exports increased 2.9 percent, propelled by sales of aircraft and industrial machines.

Dollar Declines

The dollar dropped after the reports, while stocks climbed as higher-than-expected earnings at Walt Disney Co. and Abercrombie & Fitch Co. overshadowed the drop in confidence. The yen climbed to 89.71 per dollar at 4:23 p.m. in New York, up 0.7 percent from late yesterday. The Standard & Poor’s 500 Index rose 0.6 percent to close at 1,093.48.

A collapse in world trade earlier this year brought the gap down to $26.4 billion in May, its lowest level since November 1999, as imports plunged even faster than exports. As commerce begins to pick back up, global leaders agree more needs to be done to strengthen the expansion.

U.S. Treasury Secretary Timothy Geithner and other finance ministers at the Asia-Pacific Economic Cooperation forum in Singapore this week reiterated a pledge to maintain stimulus efforts “until a durable recovery in private demand is secured.”

APEC Talks

Asia is “leading the world” back to recovery, Geithner told reporters at a press briefing with his APEC colleagues. President Barack Obama began a swing through Asia today as world leaders work toward a rebalancing that will make global growth more reliant on spending by Asian consumers and businesses and less dependent on their American counterparts.

In the U.S., rising unemployment threatens consumer spending, which accounts for two-thirds of the economy. The jobless rate jumped to a 26-year high last month and is projected to remain above 10 percent through the first half of next year.

Joblessness may also weigh 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.

The Reuters/University of Michigan 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.

Consumer Outlook

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.

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.

The preliminary Reuters/University of Michigan consumer confidence report reflects about 300 responses, compared with 500 households for the final survey.

Macy’s, the second-biggest U.S. department-store chain, is among retailers that are 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.”

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net; Bob Willis in Washington at bwillis@bloomberg.net

Last Updated: November 13, 2009 16:27 EST