Spending Increases 0.3% in November
Consumers kept pushing up their spending and U.S. factories were busier in November, the government said Friday in reports that showed the gradually slowing economy still has underlying strength.
The increase in spending was the smallest in six months, however, and another indicator showed that consumer optimism fell during December to the lowest level in two years.
Analysts said the reports eased some concern about the speed with which the economy was losing steam, though they did not change the picture of a slowdown.
“These numbers aren’t revving up the economic engine, but indicate that the brakes aren’t on quite as hard,” said economist Dave Huether of the National Assn. of Manufacturers.
Consumer spending increased 0.3% last month, after a rise of 0.4% in October, the Commerce Department said. Personal income, meanwhile, rose 0.4%, recovering from a 0.1% decline in October.
The increase in spending was the smallest since May, when it also was up 0.3%. Excluding inflation adjustments related to higher costs for electricity, gas and home heating oil, spending rose 0.1%.
Spending on big-ticket manufactured items, such as cars, declined by 1.2%, while spending on nondurable goods, such as food and fuel, was flat.
A separate Commerce report showed that the value of new orders for long-lasting durable goods, from refrigerators to new cars, rose 2.3% last month, after a 6.5% drop in October. Excluding the transportation sector, durable goods orders gained a slim 0.4% after dropping 3.1% the previous month.
Consumer spending is the lifeblood of the U.S. expansion, since purchases of goods and services fuel two-thirds of national economic activity.
In a fresh sign that consumers were growing increasingly nervous, the University of Michigan’s consumer confidence survey, issued only to paying customers, fell to its lowest level in more than two years in December.
It was down to 98.4 points from 107.6 points--the lowest since October 1998 when Russia devalued its currency and a big U.S. hedge fund collapse sent shock waves through the global economy.
Consumer spending in November was supported by draining savings, which analysts warn increases a slowing economy’s vulnerability to a sharp downturn if jobs become scarcer. The personal savings rate was a negative 0.8% in November--a record low--after being down 0.7% in October, the Commerce Department report showed.
Some analysts said that on the basis of evidence so far, the apparent fear of an accelerating slowdown was overdone.
“Income growth is the key measure to determine we are heading into a recession and people have the funds to spend,” said economist Joel Naroff of Naroff Economic Advisors Inc. in Holland, Pa. He added that the talk of economic woe seemed to be centered on Wall Street among stock traders rather than on Main Street among ordinary consumers.
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Personal Income
Seasonally adjusted annual rate, in trillions of dollars:
November: $8.44 trillion
Source: Commerce Department
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Personal Spending
Seasonally adjusted annual rate, in trillions of dollars:
November: $6.90 trillion
Source: Commerce Department
