Oct. 30 (Bloomberg) -- Consumer confidence fell more than forecast in October, a sign Americans are growing concerned about falling home values, rising fuel bills and dimmer job prospects.

The Conference Board's index of confidence declined to 95.6, the lowest since October 2005, from a revised 99.5 the prior month, the New York-based group said today. A separate report showed declines in property values accelerated in August.

The confidence report raises concern consumers will put a brake on spending, which accounts for more than two-thirds of the economy. The Federal Reserve is forecast to cut interest rates tomorrow to prevent the deepening housing recession from triggering a broader economic decline, economists said.

``Sentiment is taking the next step down,'' said Carl Riccadonna, an economist at Deutsche Bank Securities in New York. ``Housing is clearly the root of the problem. If consumer spending falls apart, the Fed will have much bigger problems to contend with.''

Consumer confidence was forecast to drop to 99, from an originally reported reading of 99.8 for September, according to the median estimate in a Bloomberg News survey of 70 economists. Projections ranged from 95 to 102.

The 10-year Treasury note rose, the dollar pared gains and stock prices fell following the report. The Down Jones Industrial Average dropped 44 points to 13,825 at 10:23 a.m. in New York.

Home Prices Drop

The Conference Board report followed figures from S&P/Case- Shiller that showed home prices in 20 U.S. metropolitan areas fell from a year earlier for an eighth straight month in August. Values dropped 4.4 percent from a year earlier, the most since records began in 2001.

Defaults by subprime mortgage borrowers and rising foreclosures will force more homes into the market, pushing down property values even more. That'll make it harder for owners to tap home equity for extra cash to spend on goods and services.

The Conference Board's measure of present conditions dropped to 118.8 from 121.1 the prior month. The gauge of expectations for the next six months decreased to 80.1 from 85.

Compared with other sentiment gauges, the Conference Board's index tends to be more influenced by attitudes about the state of the labor market, economists said.

Job Prospects

Today's report showed the share of consumers who said jobs are plentiful fell to 24.1 percent in October from 25.6 percent the prior month. The proportion of people who said jobs are hard to get rose to 22.6 percent from 22.4 percent. The 1.5-point difference is the smallest since December 2005.

The proportion of people who expect their incomes to rise over the next six months fell and the share expecting more jobs increased.

The Labor Department's employment report later this week may show payrolls rose by 80,000 in October, fewer than the prior month, according to a Bloomberg survey. Job gains so far have prevented spending from faltering even as housing has slumped. A softening labor market raises questions about whether this support will be sustained, economists said.

The International Council of Shopping Centers and UBS Securities LLC last week reduced their October chain-store sales forecast as merchants dropped prices to attract buyers.

The group now estimates sales rose 2 percent, down from a prior forecast of 2.5 percent. Target Corp. last week lowered its October sales forecast and Wal-Mart Stores Inc., the world's largest retailer, cut prices on 15,000 items for the holidays.

Not 'Robust'

``It's not a very robust time for apparel,'' Mackey McDonald, chief executive officer of VF Corp., the maker of Lee jeans and Nautica sportswear, said in an Oct. 19 interview. Consumers ``are more selective. There is a lot of pressure on their disposable income, but at the same time, they are very resilient.''

Rising prices for food and home-heating fuel combined with the decline in property values may already be prompting consumers to turn more frugal.

``The outlook for sales heading into the holiday season looks gloomier than a year ago,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. ``With the surge in oil prices likely to soon push up gasoline and home-heating oil prices, more consumers are likely to be forced to curb their holiday shopping.''

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

Last Updated: October 30, 2007 10:26 EDT