Though Incomes Rose, Consumers Held On to Wallets in Nov.
Americans spent cautiously in November ahead of the Christmas shopping season, the government reported Thursday, although solid income increases and low numbers of jobless claims showed the economy was on sound footing.
Total spending advanced only 0.1% last month to a seasonally adjusted annual rate of $5.92 trillion, the Commerce Department said. Sales of new cars slowed from a booming pace in October, when overall spending shot up by 0.7%.
Incomes, meanwhile, surged at the strongest rate in nine months, rising 0.5% to an annual rate of $7.25 trillion after a 0.4% October rise. It was the biggest boost in incomes since a matching 0.5% gain in February.
According to the personal-savings report, consumers resumed a modest pace of saving in November, putting away 0.1% of their after-tax incomes after posting a negative 0.2% for October.
Separately, the Labor Department said new claims for jobless benefits plunged last week to their lowest level in 17 months, a signal that jobs remained ample.
The department also said 287,000 people sought jobless pay from state governments last week, down from 300,000 the previous week and the lowest since the week of July 26, 1997, when the number was 276,000.
Analysts said the reports add up to a merry Christmas for working Americans and a happy start to the new year as a long-running U.S. expansion approaches 1999. If it continues through March, the U.S. economy will have completed eight years of unbroken growth since the last recession, in 1990-91.
“With this level of spending, we still have a picture of very strong growth in the fourth quarter,” said economist Greg Jones of economic forecasting firm Briefing.com in Jackson Hole, Wyo.
Ken Mayland, an economist with KeyCorp in Cleveland, predicted there will be more emphasis on saving next year and a slowing in spending as more U.S. manufacturing companies suffering from weak export sales lay off employees.
“Company after company will be announcing big layoffs,” he said. “My bet is that the personal savings rate continues to climb in 1999.”
The November spending decline was concentrated in a steep 0.9% drop in spending on costly durable goods, to $745 billion. That followed a 2.4% jump in October, when car dealers were discounting aggressively and offering incentives to clear their lots.
Spending on nondurable goods last month was up 0.3% to $1.691 trillion, following a 0.9% October increase.
Spending on services from medical care to accountants gained 0.2% to $3.49 trillion, matching October’s rise.
The most important component of income--wages and salaries--rose 0.6% in November. Wages and salaries in manufacturing were flat, reflecting U.S. trade problems. But they rose 0.9% in services, which are less affected by foreign competition.
Farm owners’ incomes surged, helped by an increase in federal subsidy payments intended to help farmers cope with declining commodity prices. Business owners’ incomes also rose, as did transfer payments such as Social Security, rental income and dividends. Interest income fell.
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Personal Income
Seasonally adjusted annual rate, in trillions of dollars:
November: $7.25 trillion
Source: Commerce Department
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Personal Spending
Seasonally adjusted annual rate, in trillions of dollars:
November: $5.92 trillion
Source: Commerce Department
