Nov. 14 (Bloomberg) -- Confidence among U.S. consumers remained near a 28-year low in November, signaling retailers may be in for the worst holiday shopping season in decades.

The Reuters/University of Michigan preliminary index of consumer sentiment unexpectedly rose to 57.9, from 57.6 in October. The measure averaged 85.6 in 2007. A June reading of 56.4 was the lowest since 1980.

Consumer spending, which comprises more than two-thirds of the U.S. economy, is likely to contract further as Americans remain pessimistic about mounting job losses and declining home values. Retail sales in the U.S. fell by the most on record in October, the government reported today.

``I don't see any reason for a rebound in consumer confidence anytime soon,'' Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, said in a Bloomberg Television interview. ``Consumers have to have some sort of idea that we're not heading down at an accelerating pace in the economy, which seems to be what we're doing right now.''

The confidence index was forecast to fall to 56.7, according to the median of 64 economists surveyed by Bloomberg News. Estimates ranged from 52 to 61.

Retail Sales Drop

Today retail sales report showed a 2.8 percent decline in October, the fourth consecutive drop and the biggest since records began in 1992, according to the Commerce Department. Sales excluding automobiles also posted their worst performance.

Separately, the Labor Department said the cost of imported goods in October decreased 4.7 percent in October, the biggest decline on record, as oil prices plunged.

The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, dropped to 55.7 from 57, today's report showed.

A gauge of current conditions, which reflects Americans' perceptions of their financial situations and whether it is a good time to buy big-ticket items like cars, rose to 61.4 from the previous month's reading of 58.4, the lowest level ever.

Consumers said they projected an inflation rate of 2.9 percent over the next 12 months, compared with 3.9 percent in the October survey. Over the next five years, the figures tracked by Federal Reserve policy makers, Americans expected a 2.9 percent rate of inflation, the same as last month.

Holiday Sales

U.S. companies are bracing for what could be the worst shopping season since at least 1985. Holiday sales may decrease 1 percent from last year, according to a survey released Nov. 12 by America's Research Group and UBS AG. America's Research Group founder Britt Beemer said it's his first negative forecast in 23 years of conducting Christmas surveys.

Best Buy Co., the largest U.S. electronics retailer, said this week that revenue from stores open at least 14 months might plunge 15 percent in the four months through February.

``Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen,'' Chief Executive Officer Brad Anderson said in a Nov. 12 statement. ``Best Buy simply can't adjust fast enough to maintain our earnings momentum for this year.''

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

Last Updated: November 14, 2008 10:22 EST