Nov. 21 (Bloomberg) -- American consumers lost confidence in November as fuel costs jumped and the housing market deteriorated.

The Reuters/University of Michigan final sentiment index dropped to 76.1, the lowest level since October 2005, following Hurricane Katrina. The gauge was at 80.9 in October and the final November index compares with a preliminary reading of 75.

Moods soured as near-record gasoline and heating-oil costs, lower stock prices and falling home values left Americans with less extra cash. The report adds to concerns that consumer spending, which accounts for more than two-thirds of the economy, will sputter going into the holiday shopping season.

``We're facing extreme price increases in energy, and it's clear the consumer is becoming more aware of the pressures being put on them,'' Lindsey Piegza, an analyst at FTN Financial in New York, said before the report. ``I don't expect a collapse in spending, but it will be very weak for the holidays.''

Another private report showed the index of leading U.S. economic indicators fell more than forecast in October, led by a plunge in building permits and an increase in firings.

The Conference Board's gauge fell 0.5 percent after a revised 0.1 percent increase that was smaller than previously estimated, the New York-based group said today. The measure points to the direction of the economy over the next three to six months.

Earlier today a government report showed the number of Americans filing first-time claims for unemployment benefits fell last week, while remaining at a level that still suggests the labor market is softening.

Jobless Claims

Initial jobless claims decreased by 11,000 to 330,000 in the week that ended Nov. 17, the Labor Department said in Washington. The four-week moving average, a less volatile measure, dropped to 329,750 from 330,500.

Economists forecast the Michigan index would decline to 75, according to the median estimate of 57 economists in a Bloomberg News survey. Estimates ranged from 72 to 81.

The expectations index, which some economists view as an indicator of future spending, dropped to 66.2 from 70.1 in October. A 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, declined to 91.5 from 97.6.

Inflation Expectations

Consumers said they expect an inflation rate of 3.4 percent in one year, compared with 3.1 percent in the October survey. Over the next five years, prices will probably rise 2.9 percent, according to the consumers polled.

The final estimate reflects about 500 responses, compared with the 300 households polled for the initial release. The university' preliminary reading, issued Oct. 12, showed a decline to 82.

The average retail price of regular gasoline rose to $3.10 a gallon this week, up from an average of $2.80 in October, according to AAA. Heating oil futures on the New York Mercantile Exchange reached an all-time high this month.

The International Council of Shopping Centers, a New York- based trade group, projects November and December comparable sales at the approximately 70 chains it tracks to climb 2.5 percent, the slowest in three years.

Consumer Spending

Consumer spending will grow at a 2 percent pace in the final three months of 2007 after rising 3 percent in the third quarter, according to the median estimate of economists in a Bloomberg survey this month.

J.C. Penney Co., the third-largest U.S. department-store chain, on Nov. 15 reduced its fourth-quarter profit forecast. A day earlier, Macy's Inc., the second-largest after Sears Holdings Corp., trimmed its sales estimate for the year-end period.

Housing and concern over credit-market losses at U.S. banks have helped drag down stocks. The Standard & poor's 500 index has fallen more than 6 percent this month.

Defaults on subprime mortgages, rising foreclosures and stricter lending practices may prolong the real-estate recession, economists said. The resulting rise in inventories of homes for sale is putting pressure on prices, making it tougher for owners to tap home equity for extra cash.

``We saw economic headwinds that quite frankly came up probably stronger than I thought,'' Starbucks Inc. Chief Executive Officer Jim Donald said in an interview Nov. 15 after the world's largest chain of coffee shops lowered its sales outlook. The company also reported its first-ever decline in U.S. customer visits.

To contact the reporter on this story: Joe Richter in Washington Jrichter1@bloomberg.net

Last Updated: November 21, 2007 10:18 EST