U.S. personal spending
increased in November at the fastest rate since July, as consumers
helped to support the recovery.
The 0.5 percent gain in spending at an annual rate was the
second straight increase, following a 0.4 percent rise in October,
the Commerce Department said. The increase was led by rising
orders for durable goods such as autos. Incomes gained 0.3 percent
for the fourth consecutive month.
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“It takes a real shock to knock the consumer down,” said
David Rosenberg, chief North American economist at Merrill Lynch,
before the report.
Sales may not have maintained their November momentum into
this month, sparking concerns about a lackluster holiday season.
Target Corp., Wal-Mart Stores Inc. and Federated Department Stores
Inc. are among retailers whose sales were at the low end of or
below their own estimates in the next to last week before
Christmas. Responsible for two-thirds of gross domestic product,
consumers are critical to the health of the economy.
Economists had expected a 0.5 percent increase in spending
and a 0.2 percent rise in incomes for November, based on the
median of 41 estimates in a Bloomberg News survey.
While consumer confidence rose this month to its highest in
four months, growing unemployment, war fears and weaker equity and
home prices have led economists to predict household spending will
soon cool. Spending will probably grow at a 1.1 percent annual
pace in the final three months of 2002, the slowest in nearly a
decade, according to the Blue Chip Economic Indicators December
survey.
“Low interest rates and rapid advances in productivity have
been providing considerable support to economic activity,”
Federal Reserve Chairman Alan Greenspan said in a speech last week
to the Economic Club of New York. “The U.S. economy has been
working its way through a soft patch.”
Economists expect that overall growth will slow to a 1.5
percent annual rate this quarter after a 4 percent acceleration in
the prior three months. To ensure the economy gains traction, Fed
policy makers will probably hold the benchmark overnight bank
lending rate at a 41-year low of 1.25 percent at least until the
third quarter of 2003, according to a majority of economists at
the 22 primary dealers, bond firms that trade directly with the
central bank.
The amount of spending in November adjusted for inflation was
$6.626 trillion, higher than the $6.595 trillion at an annual rate
in October.
Purchases of non-durable goods in November increased 0.4
percent, at a monthly rate in chained 1996 dollars, after rising
0.6 percent in October. Spending on services, which account for
half of the report, gained 0.2 percent after increasing 0.3
percent in September.
Buying of durable goods such as autos, appliances and other
big-ticket, long-lasting items, grew 1.9 percent in November, the
biggest gain since August, after declining 1.3 percent the prior
month, today’s report showed.
U.S. automakers, using discounts, are on pace to post their
second-best sales year ever in North America. The 16 largest
vehicle makers by sales in North America, led by General Motors
Corp., will sell 19.8 million cars and light trucks in North
America this year, research firm Global Insight Inc. said. That
would almost equal the record of 19.9 million set in 2000.
Disposable income, or the money left over after taxes, rose
0.4 percent in November for the fourth straight month. Wages and
salaries were 0.4 percent higher after rising 0.3 percent.
The personal savings rate was 4.3 percent in November, down
from 4.4 percent in each of the two prior months. The indicator
weighs current income from wages, salaries, businesses and
government payments against spending. It doesn’t account for
borrowed money, income from investments, or withdrawals from prior
savings.
Bloomberg News
