Spending and Incomes Show Weak November Gains

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Spending and incomes show weak november gainsWASHINGTON (AP) - Consumers spent at a lackluster rate in November as their incomes barely grew, suggesting that U.S. households may struggle to sustain their spending into 2012.

Consumer spending rose just 0.1 percent in November, matching the modest October increase, the Commerce Department reported Friday. Incomes also rose 0.1 percent. That was the weakest showing since a 0.1 percent decline in August.

Both the spending and income gains fell below expectations. Economists have said that solid increases in spending could boost economic growth in the final three months of what has been a disappointing year.

Paul Ashworth, chief U.S. economist at Capital Economics, called the consumer spending figure disappointing. He said it would probably mean lower economic growth than had been expected.

Rather than grow at an annual rate of up to 3 percent in the October-December quarter, the economy will likely expand at a rate of about 2.5 percent this quarter, Ashworth says. That would still be an improvement from the 1.8 percent growth in the July-September quarter.

While the economy remains vulnerable to threats, particularly a recession in Europe, the job market has improved, lifting hopes for next year.

The government said this week that applications for unemployment benefits fell by 4,000 last week to 364,000. It was the third straight weekly drop. And it pushed applications to the lowest level since April 2008, in the midst of the Great Recession.

The weakness in incomes reflected a decline in wages and salaries, the biggest component of incomes, in November.

The sluggish gain in spending was held back by a 0.3 percent fall in spending on non-durable goods such as food, clothing and gasoline. Spending on durable goods jumped 0.8 percent. It reflected the solid auto sales during the month.

Spending on services, which includes such items as medical treatments and rent, rose a modest 0.1 percent.

After-tax incomes showed no growth in November. The savings rate dipped to 3.5 percent of after-tax incomes, down from 3.6 percent in October. Both months marked the lowest savings rate since late 2007. They show that consumers are having to tap their savings to finance their spending because of the weak income growth.

The small rise in overall consumer spending was puzzling given that other reports have shown solid holiday shopping this season. Those reports had caused many economists to revise up their growth forecasts for the current quarter.

Analysts at JPMorgan (JPM) think the economy is growing at an annual rate of 3.5 percent in the current October-December quarter. That would be up from 1.8 percent growth in the July-September quarter and would be the best quarterly gain since the spring of 2010.

Economists still expect that growth to be driven by an improvement in consumer spending, which accounts for 70 percent of economic activity. Spending rose at a 1.7 percent rate in the third quarter, more than double the second-quarter gain. JPMorgan analysts expect consumer spending to grow at a 3 percent pace in the current quarter.

Even with the spurt of activity at the end of the year, economists think growth for all of 2011 will be a lackluster 1.7 percent.

They had much higher expectations when the year began. But then a spike in gasoline prices held back consumer spending for other items. And the earthquake in Japan disrupted supply chains for auto and electronic parts, dampening factory production in the United States.

Many analysts do not expect growth in 2012 to be significantly better than in 2011. JPMorgan economists predict the economy will expand 1.9 percent in 2012, only slightly better than this year.


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Frank

Just shows you all those "Black Friday" numbers were a bunch of BS. This does correlate with the UPS driver that said things were slower than last year...I like to get my info from the workers who know best what reality is.... Let's see the unemployment numbers after the seasonal help is released over the next two weeks.

December 27 2011 at 7:49 AM Report abuse rate up rate down Reply
knkdnsr

I can not wait to see what numbers our government tries to spin on the holiday spending. My wife and I were out getting a few last minute items on Friday and Saturday. I live in the southeastern corner of Pa. Our area was not hit has hard by this recession as some. We also have some of the largest shopping malls not too far from hosing areas that could be considered upper middle class and the 1% as people put it. These homes sell for 350,000 and up
The malls we traveled to were just about empty. We were able to find a choice of parking spots not far from the main door. We were next in line at the checkout. The only store that had people buying were a discount food store. Even the people that I spoke to while waiting in line said the same thing about other malls and even walmarts in the area . No crowds and no problem parking. I do not care what our government says people are still not spending.

December 26 2011 at 12:31 PM Report abuse +1 rate up rate down Reply
Mike

Fed res dollar printing has increased to keep up with US treasury's need for them as debt buyer of last resort. Euro is doing same for their debt but doesn't hold the luxury as world's res currency. Fed exports it's inflation to the world euro can't & WILL hypor inflate to ZERO. Europ will run to the dollar as others trade for gld/slvr. Even with small demand increase gld/slvr price rise outside the fed's ability to keep suprpressed & dollar will start its final fall, world WILL panic & gld/slvr will BE only reserve currency. World fiat monotary system is collapsing & we face deep depression. Got Gold? China & India does, why's that you figure?

December 25 2011 at 4:55 PM Report abuse rate up rate down Reply
marine1942

Thanks Obama
Enjoying your vacation ??
This country is losing in economics, education,,etc.

December 24 2011 at 4:49 PM Report abuse +1 rate up rate down Reply
1 reply to marine1942's comment
Mike

has lost but liberal agenda of socialists indoctrination is almost absolute

December 26 2011 at 1:42 PM Report abuse rate up rate down Reply
jdykbpl45

More BS from Huff Puff and Obama's minions. Unemployment, according to Obama has gone down. This does not jjibe with this article. More lies, damn lies and statiscics from Obamaland.

December 23 2011 at 12:19 PM Report abuse +3 rate up rate down Reply