Personal Spending Up Moderately Last Month

Consumers increased spending moderately in November even though the growth in their income slowed a bit, raising doubts about how strong the Christmas sales season will be.

The Commerce Department said personal spending rose 0.3% last month, slightly below the 0.4% gain that Wall Street had been expecting. Income rose 0.3% last month, in line with expectations.

The holiday shopping season has turned in a mixed performance, with retailers expected to increase discounting in the final days before Christmas in the hopes of making up for slower-than-expected sales since Thanksgiving.

In other economic news, the number of Americans filing new claims for unemployment benefits fell to a seasonally adjusted 318,000 last week, down by a better-than-expected 13,000 from the previous week.

The total claims included 1,400 related to hurricanes Katrina, Rita and Wilma, bringing total job losses from the three storms to 603,600.

The report on income and spending had good news on inflation. An inflation gauge tied to personal consumption fell 0.4%, the biggest one-month decline on record. Excluding food and energy, inflation was up a slight 0.1% in November.

For the last 12 months, inflation excluding food and energy rose a moderate 1.8% while overall inflation was up 2.7%.

The personal consumption inflation index is favored by the Federal Reserve, which has boosted interest rates 13 times since mid-2004 in an effort to make sure that rising energy prices do not turn into more widespread inflation problems.

The 0.3% rise in income followed a 0.5% gain in October. Income growth last month was supported by a sharp rebound in job growth, with businesses adding a net 215,000 workers to their payrolls after two weak months that saw heavy job layoffs in the Gulf Coast states affected by the hurricanes.

The savings rate, the amount left over after spending and taxes, remained at minus 0.2% in November.