Economy Shows Year-End Vigor
Americans spent and earned more money in November and gained confidence this month, showing year-end strength in the U.S. economy, according to a batch of economic reports released Thursday.
Orders of durable goods rebounded in November, and last week’s initial jobless claims rose 17,000 to 333,000, less than expected, according to the Commerce and Labor departments. And consumer confidence reached its highest level in 11 months in a University of Michigan survey.
“The basic message of all these reports today is that the economy is in line for solid, above-average growth,” said Ken Mayland, president of ClearView Economics in Pepper Pike, Ohio.
The Commerce Department figures for November showed gains of 0.2% for personal spending, 0.3% for personal income and 1.6% in orders for aircraft, computers and other goods made to last three years or more. One other Commerce report Thursday was less positive: The number of new homes sold fell 12% in November to a 1.125-million annual rate from an all-time high in October.
Consumer confidence rose to 97.1 this month from 92.8 in November in the University of Michigan’s final reading Thursday. December’s figure was the highest since January.
The boost in confidence and the fifth straight rise in spending suggest consumers are comforted by job growth and rising incomes. The number of people on unemployment, 2.721 million, is near a three-year low.
“The economy is growing at a fairly solid clip,” said Laurence Meyer, a former Federal Reserve governor and president of St. Louis-based Meyer’s Monetary Policy Insight. “We’re converging toward full employment.”
The gain in personal spending followed a 0.8% rise in October that was larger than previously estimated, the Commerce Department said. Economists had predicted gains of 0.3% for spending and 0.2% for income.
The increase in durable-good orders to $198.9 billion followed a 0.9% decline in October that was smaller than first reported. After the October adjustment, orders exceeded the median forecast of about $197.5 billion in a Bloomberg News economist survey. Excluding transportation equipment, bookings fell 0.8% after a decline of 1.3%.
The increase in spending suggests income growth is enough to fuel demand. Retail sales unexpectedly rose for a third month in November, the Commerce Department said Dec. 13, helping allay concern about a slow start to the holiday shopping season. The year-end pace may hinge on what shoppers do this week and next.
Retailers including Macy’s and Circuit City Stores Inc. aren’t taking any chances, cutting prices by half on some items.
“There’s a little heftier economy,” said Maureen Bausch, vice president of business development at the largest U.S. shopping center, the Mall of America, in Bloomington, Minn. “People are more comfortable. Retailers are buying right and they are pricing right.”
The economy is forecast to grow 3.8% this quarter, based on the median estimate of economists surveyed by Bloomberg News between Dec. 1 and Dec. 8. The survey was taken before reports showed stronger-than-expected retail sales in November and economic growth at a 4% pace in the third quarter, revised from 3.9%.
