economy

October consumer spending in U.S. rises less than forecast

Posted 11/23/11

WASHINGTON - Consumer spending in the U.S. rose less than forecast in October as Americans used the biggest gain in incomes in seven months to rebuild savings, indicating the biggest part of the economy may contribute less to the recovery.

Purchases increased 0.1 percent, after a 0.7 percent gain the prior month, Commerce Department figures showed today in Washington. The median estimate of 82 economists surveyed by Bloomberg News called for a 0.3 percent advance. Incomes rose 0.4 percent, and the savings rate climbed from a four-year low.

An October slowdown in household spending, which accounts for about 70 percent of the economy, raises concern about the holiday shopping season that kicks off this week. A jobless rate of 9 percent and confidence at recession levels explain why chains like Macy’s Inc. and Kohl’s Corp. are offering discounts.

“It will probably be a lukewarm holiday season,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “We are not hearing anecdotes of a major pullback, nor does it look like consumers are accelerating their spending.”

Projections for spending ranged from increases of 0.1 percent to 0.6 percent. The September reading was revised from a gain of 0.6 percent.

Economists had forecast incomes would rise 0.3 percent, according to the Bloomberg survey.

Orders for durable goods fell in October, showing manufacturing may also cool as spending slows, other figures from the Commerce Department showed Wednesday.

Durable Goods

Bookings for goods meant to last at least three years fell 0.7 percent after a 1.5 percent decrease the prior month that was larger than originally reported, the Commerce Department said Wednesday in Washington. Orders excluding transportation equipment rose, and demand for business equipment dropped.

The number of claims for jobless benefits rose last week from a seven-month low, signaling the rate of firings has stabilized after slowing in recent weeks, figures from the Labor Department also showed Wednesday. Applications for unemployment insurance payments increased by 2,000 in the week ended Nov. 19 to 393,000. The number of people on unemployment insurance rolls rose and those receiving emergency benefits declined.

Stock-index futures held earlier losses after the reports as the cost of insuring European government debt against default rose to a record on concern the region’s crisis is worsening. The contract on the Standard & Poor’s 500 Index maturing next month fell 1 percent to 1,170.7 at 8:55 a.m. in New York. Treasury securities were little changed.

Wages Climb

Wages and salaries increased 0.5 percent, the biggest gain since March, Wednesday’s income and spending report showed.

The savings rate increased to 3.5 percent from 3.3 percent in September that was the lowest since December 2007.

Wednesday’s report showed that adjusted for inflation, which are the figures used to calculate gross domestic product, consumer spending rose 0.1 percent after a 0.5 percent increase.

The Fed’s preferred price index, which is tied to spending patterns and excludes food and fuel, increased 1.7 percent from October 2010, compared with a 1.6 percent gain in the 12 months ended in September.

The so-called core price index rose 0.1 percent from the prior month, matching the median forecast of economists surveyed.

GDP Revision

Gross domestic product climbed at a 2 percent annual rate from July through September, less than projected and down from 2.5 percent prior estimate, revised Commerce Department figures showed yesterday. Excluding a reduction in stockpiles, so-called final sales rose 3.6 percent, the most since 2010’s fourth quarter.

Retailers like Macy’s and Kohl’s have said they plan to use more discounts to lure shoppers. The day after the Thanksgiving holiday tomorrow is known as Black Friday, the unofficial start of the holiday shopping season.

More affluent consumers are holding up “pretty well,” Stephen Sadove, chief executive officer of luxury retailer Saks Inc., said in a Bloomberg Television interview on Nov. 18. The average income of the Saks shopper is $200,000 a year, he said.

Other retailers are less optimistic as unemployment has hovered near or above 9 percent for more than two years and companies limit hiring.

“Until the U.S. begins to see robust improvement in jobs and signs of recovery in the housing market, we believe consumer spending will likely continue to be soft and uneven,” Doug Scovanner, chief financial officer at Target Corp., the second- largest U.S. discount retailer, said on a Nov. 16 call with analysts.

Some Federal Reserve policy makers said the central bank should consider additional easing to lower borrowing costs and boost job creation, according to minutes of their Nov. 1-2 meeting released yesterday.

Calendar
PBN Hosted
Events

Two Great Programs...One Great Event. PBN's Annual Celebration of Growth and Innovation is now underway. 2014 applications are now available. Deadline August 1st.
  • 40 Under Forty
    We're almost sold out. The 10th Anniversary of 40 Under Forty, and PBN is planni ...
  • Healthiest Employers
    See who the Healthiest Employers in RI are! And save the date - August 14th - at ...
Advertisement
Purchase Data
Book of Lists
Lists
Book of Lists cover
PBN's annual Book of Lists has been an essential resource for the local business community for almost 30 years. The Book of Lists features a wealth of company rankings from a variety of fields and industries, including banking, health care, real estate, law, hospitality, education, not-for-profits, technology and many more.
Data icons
Data can be purchased as single lists, in either Excel or PDF format; the entire database of the published book, in Excel format; or a printed copy of the Book of Lists.
  • Purchase an e-File of a single list
  •  
  • Purchase an e-File of the entire Book of Lists database
  •  
  • Purchase a printed copy of the Book of Lists
  •  
    National
    Local
    Latest News
    Advertisement