Americans' personal income rose 0.6% in November, the biggest advance in seven months, while their spending soared 0.9%, the government reported today.
The rise in consumer spending followed a big 1.4% decline in October, which had been the largest drop in spending since May, 1960. The October drop was blamed on weak demand for new autos after two months of strong sales spurred by attractive cut-rate financing deals.
The November rebound was likely to lend encouragement to those looking for consumer spending to gain strength during the important Christmas selling season.
The consumer sector accounts for about two-thirds of the nation's economic activity. There have been worries in recent months that weak consumer spending could hold back the overall economy. Consumers are carrying record debt burdens and their savings rate has fallen.
The new report said personal savings dipped to 4.2% of disposable income in November, down slightly from the 4.5% level of October.
The savings rate had fallen to a record low of 2.8% in September. This originally was listed as an even lower 1.2%, but this number, along with every other number, has undergone a comprehensive revision to update the report.
The 0.6% November income rise was the largest increase since a 0.9% rise in April.
The income advance reflected an increase of $6.5 billion in wages and salaries, up from a $4.5-billion October increase.
Payrolls at U.S. factories were up by $1.7 billion in November, slightly better than October, as the employment level and hourly earnings were both up. U.S. manufacturing has been weak for most of the year as domestic producers have suffered from intense foreign competition.
The rise in consumer spending reflected a gain of $22.1 billion after a $37.5-billion decline in October. The turnaround reflected a modest increase in car sales in November after the big October drop.
In September, consumer spending had risen 1.2%.