Consumer Spending Rises in Oct.
U.S. consumers, enjoying the strongest job market in decades, spent freely in October, the Commerce Department reported Friday, offering a heartening sign for retailers at the onset of the holiday shopping season.
As post-Thanksgiving Day sales opened the run-up to Christmas--the annual four-week period in which some stores count on making a quarter or more of their sales for the year--the government reported that spending rose 0.5% in October to a seasonally adjusted annual rate of $5.58 trillion.
That compares with the 0.3% increase for September.
Personal income from wages, salaries and all other sources was up for a 12th consecutive month, the department reported, rising 0.5% to $6.97 trillion a year. The gain for September was 0.3%.
“Rising incomes are in place. Spending heading into the fourth quarter is good. Surveys show people saying they intend to spend more this Christmas than last year,” said economist Kevin Harris of MCM MoneyWatch in New York.
Reports from around the U.S. on Friday indicate that shoppers are responding to the heavily promoted seasonal sales blitz, with crowds lining up at stores in search of bargains.
Industry analysts are predicting a modest 3% to 5% sales increase over the 1996 holiday season. Many analysts expect slightly better results in Southern California, where merchants hope to record their first back-to-back seasonal increases this decade.
U.S. unemployment in October hit a 24-year low of 4.7%, helping keep incomes on the rise and swelling consumers’ optimism about their futures. Consumer spending accounts for two-thirds of U.S. economic activity, and analysts note ample reasons to expect it to remain robust.
“Employment is good; incomes are good; the stock market, while off its highs, is strong; interest rates have come down; and consumer confidence is at stratospheric levels,” said Robert Dederick, economic consultant to Northern Trust Co. in Chicago.
“The clouds from Southeast Asia don’t seem to be having any noticeable negative impact,” he added. “So all the fundamentals certainly are in place for a good Christmas shopping season.”
The Commerce Department said October’s savings rate was unchanged from September’s--3.6 cents out of each dollar earned, a relatively low rate, apparently reflecting optimism that the country’s economic expansion will continue and that, therefore, personal income will continue to see steady gains.
Only spending on durable goods, which includes new cars, weakened in October, falling 0.4% to an annualized $661.8 billion a year, after posting a decline for September of 0.3%.
Spending on non-durables, however, rose 0.3% to an annualized rate of $1.611 trillion, after having gained 0.4% for September. Services spending gained 0.8% to $3.304 trillion last month, after a rise of 0.4% for September.
Lynn Reaser, an economist with Barnett Banks Inc. in Jacksonville, Fla., said that with the economy having been strong for so long, many people have already bought the new appliances and vehicles they wanted.
“We may see that reflected in Christmas sales, with people spending more dollars on trips to Disney World and things like that than spending on new cars for Christmas,” Reaser said.
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Healthy Gains
Strong job growth boosted incomes in October, triggering a solid gain in personal spending. Seasonally adjusted annualized rate, in trillions of dollars:
Personal Income
Oct. ‘97: $6.97
Personal Spending
Oct. ‘97: $5.58
Source: Commerce Department
