Oct. 30 (Bloomberg) -- Crude oil fell the most in a month after U.S. consumer spending dropped for the first time since April, increasing skepticism that the economy will strengthen.

Oil decreased 3.6 percent and equities declined after the Commerce Department said purchases slipped 0.5 percent in September in the world’s biggest energy-consuming country. Futures climbed the most in two weeks yesterday after a government report that the U.S. grew in the third quarter.

“People are still antsy that this will be a tepid recovery,” said Chip Hodge, who oversees a $9 billion natural- resource bond portfolio as senior managing director at MFC Global Investment Management in Boston. “Given where the economy is, $80 oil doesn’t make a hell of a lot of sense.”

Crude oil for December delivery fell $2.87 to end the session at $77 a barrel at 2:49 p.m. on the New York Mercantile Exchange, the biggest decline since Sept. 24. Prices dropped 4.3 percent this week, the first decrease this month.

Futures climbed 9 percent in October, the biggest monthly increase since a 30 percent rally in May.

The Standard & Poor’s 500 Index declined 2.8 percent to 1,036.19 and the Dow Jones Industrial Average dropped 2.5 percent to 9,712.73.

In the 12 months to June, the U.S. economy shrank 3.8 percent, the worst performance in seven decades, according to the Commerce Department. The four quarterly decreases marked the longest stretch of declines since the records began in 1947.

‘One-Day Event’

“Yesterday we were celebrating the end of the recession, but now there are worries about whether there will be enough positive economic data to keep the market advancing,” said Phil Flynn, vice president of research at PFGBest in Chicago. “It looks like the rally was a one-day event and now we will return to looking to the stock market for direction.”

The Reuters/University of Michigan final index of consumer sentiment fell to 70.6 in October from 73.5 the month before.

Third-quarter growth “was boosted by the various fiscal stimulus policies,” Harvard University professor Martin Feldstein said in an e-mail. “The danger remains of a serious slowdown after this and a possible double dip” of the economy in 2010, he said.

Consumer spending on cars was spurred by the government’s “cash for clunkers” plan, which expired in August. Builders benefited from a first-time home-buyers tax credit that may be extended beyond its Nov. 30 expiration date.

“There’s concern the economy will show a double dip,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “You are hearing fears that the end of the stimulus program will spell the end of the economic recovery.”

Price Outlook

Crude oil may fall next week on speculation the dollar will rebound against the euro and equities may pull back, according to a Bloomberg News survey. Fifteen of 34 analysts and traders, or 44 percent, said futures will drop through Nov. 6. Ten respondents, or 29 percent, predicted the market will rise and nine forecast prices will be little changed.

The U.S. currency traded at $1.4721 per euro, up from $1.4822 yesterday. A rising dollar reduces demand for raw materials as an alternative investment.

“The fundamentals don’t support prices at these levels and will eventually have to reassert themselves,” Hodge said.

Oil plunged on Oct. 28 when the Energy Department reported that U.S. gasoline stockpiles climbed 1.62 million barrels to 208.6 million. Inventories of crude oil rose 778,000 barrels to 339.9 million in the week ended Oct. 23.

Gasoline for November delivery fell 7.58 cents, or 3.8 percent, to $1.9432 a gallon in New York, the lowest since Oct. 14. Heating oil for October delivery declined 7.31 cents, or 3.6 percent, to settle at $1.9811 a gallon, the biggest drop since Sept. 24.

Alternative View

Some analysts and traders said today’s decline isn’t the beginning of a trend to lower prices and that futures are set to increase through the end of the year.

“When it comes to positive U.S. macroeconomic data, there is only one way for the oil price to go,” Tamas Varga, an analyst with PVM Oil Associates Ltd. in London, said in a report. “If the performance of the market this month is anything to go by, then the next $25 move is more likely to be to the upside.”

Brent crude for December settlement dropped $2.84, or 3.6 percent, to end the session at $75.20 a barrel on the London- based ICE Futures Europe exchange. It was the biggest decline since Sept. 24.

Oil volume in electronic trading on the Nymex was 544,797 contracts as of 3:06 p.m. in New York. Volume totaled 570,229 contracts yesterday, 0.1 percent lower than the average over the past three months. Open interest was 1.24 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

Last Updated: October 30, 2009 16:11 EDT