Personal Income Up, Consumer Spending Bounces Back 0.7%

Consumer spending rebounded 0.7% in November after its steepest decline in nearly three years a month earlier, while personal incomes grew 0.8%, the government reported today.

The Commerce Department said consumer spending totaled a seasonally adjusted annual rate of $3.54 trillion, the steepest jump since a 1% advance last August.

The spending gain followed a 0.2% decline in October, the first decrease since a 0.1% dip in September, 1988, and the largest drop since a 1.4% decrease in January, 1987.

Personal incomes in November totaled $4.54 trillion at a seasonally adjusted annual rate, following a similar 0.8% gain to $4.50 trillion in October. It was the largest increase since a 1% gain last March.

Consumer spending is watched closely as a barometer of economic health because it accounts for about two-thirds of the nation’s economic activity.

As measured by the gross national product, the economy grew at a 3% rate in the third quarter, but analysts expect a sharp decline in the three-month period ending Dec. 31.

The November report showed that Americans’ incomes after taxes rose 0.9%, up from October’s 0.8% gain.

Americans’ savings rate, savings as a percentage of disposable income, rose to 6.1%, up from October’s 5.7%.

The key component of the income category, wages and salaries, edged up $1.7 billion in November following a $29.4-billion gain in October.

Payrolls at manufacturing companies, hit hardest by the Federal Reserve’s high-interest policies, fell $4.9 billion, after an October advance of $6.3 billion.

On the spending side, the $26.2 billion increase in personal consumption, which includes everything except interest payments on debt, contrasted to a $6.3 billion decrease in October.

Purchases of durable goods--big-ticket items expected to last more than three years--rose $1.9 billion, while purchases of non-durable goods jumped $12.4 billion. Spending on services increased $11.9 billion.