Tags: consumer | spending | cars | furniture

Consumer Spending Increases by Most in Five Months

Monday, 23 Dec 2013 08:45 AM

Consumer spending rose in November by the most in five months as Americans took advantage of store discounts during the year-end shopping season, giving the world’s largest economy a lift.

Household purchases, which account for almost 70 percent of the economy, rose 0.5 percent after a 0.4 percent gain in October that was larger than previously estimated, the Commerce Department reported today in Washington. The median forecast of 76 economists in a Bloomberg survey called for a 0.5 percent rise. Incomes climbed less than forecast, reflecting a slump in earnings by farmers.

The report follows data last week that showed stronger momentum in economic growth as households stepped up spending. While some retailers have been discounting, an improved labor market and buoyancy in housing and stocks has lifted sales of cars, furniture, appliances and other durable goods.

“We see the rate of job and income growth picking up, and low inflation is making that income go further for consumers,” Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama, said before the report. “We’re farther along in the restoration of household balance sheets, and that’s turning up in some of the consumer spending numbers.”

Projections for spending ranged from gains of 0.2 percent to 0.7 percent. October’s reading previously was reported as an increase of 0.3 percent.

Income Breakdown

Incomes increased 0.2 percent in November after dropping 0.1 percent the prior month. The Bloomberg survey median called for incomes to rise 0.5 percent. The gain was held back by a $12 billion decrease at an annual rate in farm income as commodity prices decreased.

Third-quarter gross domestic product expanded at the fastest rate in almost two years as Americans stepped up spending, the Commerce Department reported last week. Consumer purchases, which account for almost 70 percent of the economy, increased 2 percent, more than the previously reported 1.4 percent.

The unexpected pickup underscored the Federal Reserve’s view that the world’s largest economy is improving.

After adjusting for inflation, purchases also climbed 0.5 percent, the biggest gain since February 2012, after a 0.4 percent increase in October, today’s Commerce report showed.

The price index tied to spending, a measure of inflation tracked by Fed policy makers, was unchanged in November from the prior month and rose 0.9 percent from the same month last year. The central bank’s goal is for prices to rise 2 percent a year.

Little Inflation

Core prices, which exclude the volatile food and fuel categories, increased 0.1 percent from November and advanced 1.1 percent from the same month in 2012.

The saving rate dropped to 4.2 percent last month, the lowest since February, from 4.5 percent.

An improving job market is helping sustain spending. Wages and salaries rose 0.4 percent.

While many retailers, including Kohl’s Corp. and Walgreen Co., have adopted more-aggressive promotions this year, car dealerships and furniture stores are reporting improved sales.

At Hooker Furniture Corp. in Martinsville, Virginia, sales in the three months ended Nov. 3 were up 7.8 percent and the company had its second-largest shipping quarter in five years. Orders are solid, said Chairman and Chief Executive Officer Paul Toms.

“We have solid economic fundamentals on our side including conditions for an improved housing market, consumer confidence at a five-month high and a stock market pushing all-time highs,” Toms said on a Dec. 11 earnings call. “We are generally still bullish on both the short and long-term basis.”

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Economy
Consumer spending rose in November by the most in five months as Americans took advantage of store discounts during the year-end shopping season, giving the world's largest economy a lift.
consumer,spending,cars,furniture
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2013-45-23
Monday, 23 Dec 2013 08:45 AM
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