Quantcast
Get breaking news alerts via email

Click here to manage your alerts
FILE - In this Thursday, Nov. 28, 2013, file photo, a shopper holds her purchases while shopping at a Gap factory store at the Citadel Outlets in Los Angeles. The Commerce Department reports how much consumers spent and earned in November on Monday, Dec. 23, 2013. (AP Photo/Jae C. Hong, File)
US consumer spending rose 0.5 percent in November
First Published Dec 23 2013 09:48 am • Last Updated Dec 23 2013 09:48 am

Washington • Americans increased their spending in November by the most in five months, and their income edged up modestly.

Consumer spending rose 0.5 percent from October, when spending had risen 0.4 percent, the Commerce Department said Monday. It was the best showing since June. The gain was driven by a jump in spending on long-lasting durable goods such as autos.

Join the Discussion
Post a Comment

Consumers’ income rose 0.2 percent, an improvement from a 0.1 percent decline in October. Wages and salaries, the most important component of income, rose a solid 0.4 percent. That gain reflected strength in the private sector and a modest gain in government pay.

Consumer spending is closely followed because it accounts for about 70 percent of economic activity. The strong November showing suggests solid economic growth this quarter.

Steady hiring and modest wage gains have boosted consumer confidence and given Americans more money to spend. At the same time, higher stock and home prices have driven up household wealth and made some people more comfortable about spending.

The big rise in spending and smaller income gain meant that the personal saving rate slipped a bit to 4.2 percent of after-tax income in November. That was down from 4.5 percent in October.

An inflation gauge tied to consumer spending that is closely followed by the Federal Reserve showed that inflation is still running well below the Fed’s target. Prices were unchanged in November and have risen just 0.9 percent over the past 12 months. The Fed’s target for annual inflation is 2 percent.

The economy, as measured by the gross domestic product, grew at an annual rate of 4.1 percent in the July-September quarter, the government said Friday in its third and final estimate. The government’s figure was up from its previous estimate of a 3.6 percent annual growth rate for the third quarter. Nearly all of the upward revision reflected faster spending for consumers, a possible sign of momentum entering the final three months of the year.

The 4.1 percent growth rate in the third quarter was the best performance in nearly two years. It was only the second time since the economic recovery began in mid-2009 that annual growth in any quarter has topped 4 percent.

Economists caution that growth will likely slow in the October-December period. That’s because two-fifths of last quarter’s gain came from an unusually large buildup in business stockpiles — something not likely to be repeated this quarter.


story continues below
story continues below

But analysts were encouraged by the recent acceleration in spending and say rising job growth could fuel more spending in coming months. Many analysts believe the economy’s annual growth rate will slow to between 2 percent and 2.5 percent this quarter because of the expected drag from slower stockpiling. But some said the better-than-expected spending could mean more strength than expected and a stronger start to 2014.

"Consumers are spending at the fastest rate this quarter than any time since 2010," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi. "With numbers like these, tomorrow is shaping up to be the better tomorrow we have wanted to see ever since the recession ended almost five years ago."

President Barack Obama took note last week of the encouraging reports, including four straight months of solid job gains. That spurt of hiring has helped lower the unemployment rate to 7 percent, a five-year low.

The drag from higher taxes and across-the-board spending cuts has shaved an estimated 1.5 percentage points from economic growth this year, which analysts think will be around 1.8 percent. But the effects will lessen next year, something economists note in their forecasts for around 2.5 percent growth or better in 2014.

A stronger outlook for the economy and job market led the Fed last week to begin winding down its bond-buying program. The Fed’s bond purchases have been intended to lower long-term interest rates and encourage more borrowing and spending.

The Fed said that it would begin reducing its $85 billion-a-month in bond purchases by $10 billion in January. Chairman Ben Bernanke said that if the economy keeps improving, the bond purchases could be trimmed by similar amounts at coming meetings.

Jennifer Lee, senior economist at BMO Capital Markets, said the stronger spending in October and November validates the Fed’s decision to pare its bond purchases and should boost growth this quarter. At the same time, tepid inflation allows the Fed to make only modest reductions in its bond purchases without fear of igniting price increases.



Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment


About Reader Comments


Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Videos
Jobs
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Login to the Electronic Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.