Dec. 21-- Consumer spending in the U.S. rose in November by the most in more than two years as incomes grew and shoppers took advantage of early holiday discounts.
A bigger-than-forecast 1.1 percent increase in purchases followed a revised 0.4 percent gain in October that was more than previously estimated, the Commerce Department said today in Washington. The Federal Reserve's preferred measure of inflation accelerated, the report showed.
More jobs and higher salaries may avert a collapse in spending, which accounts for more than two-thirds of the economy, as home values fall and fuel costs rise. The jump in sales last month reduces the odds the economy will contract this quarter, even as retail surveys suggest shopping has cooled in December, economists said.
``We can postpone fears of a recession at least until next year,'' said Ryan Reed, an economist at National City Corp. in Cleveland, who forecast a 1 percent gain in spending. ``Inflation sure is worrying the Fed, but there is not much they can be doing at this point.''
Economists forecast spending would rise 0.7 percent, after an originally reported 0.2 percent increase in October, according to the median of 73 estimates in a Bloomberg News survey. The November increase was the biggest since July 2005.
Treasuries fell, sending the 10-year note yield up to 4.08 percent at 8:47 a.m. in New York, from 4.05 percent late yesterday.
Incomes Gain
Incomes rose 0.4 percent after a 0.2 percent increase the prior month, today's report showed. Personal income was forecast to rise 0.5 percent, according to the survey median.
The inflation measure tracked by the Fed rose 0.2 percent for a second month. It was up 2.2 percent from November 2006, the biggest year-over-year gain since March, compared with the 2 percent median estimate in the Bloomberg survey.
Adjusted for inflation, spending increased 0.5 percent, the most this year, after a 0.1 percent increase the prior month, the report showed.
Because the increase in spending was larger than the gain in incomes, the savings rate dropped to minus 0.5 percent, the lowest since August 2005, from 0.3 percent the prior month. A negative rate suggests consumers are drawing down savings to maintain spending.
Disposable income, or the money left over after taxes, rose 0.3 percent. Adjusted for inflation, disposable income decreased 0.3 percent.
Durable Goods
Inflation-adjusted spending on durable goods, such as autos, furniture, and other long-lasting items, rose 0.6 percent after falling 0.1 percent. Purchases of non-durable goods also increased 0.6 percent and spending on services, which account for almost 60 percent of all outlays, rose 0.5 percent.
The job market may be one bright spot for Americans, as the housing recession extends into 2008 and the subprime mortgage crisis makes borrowing tougher. Payrolls rose by 94,000 in November and the jobless rate was unchanged at 4.7 percent for a third month, the Labor Department said this month.
Some merchants took matters into their own hands last month to stimulate sales. Bentonville, Arkansas-based Wal-Mart Stores Inc., the world's largest retailer, said November sales rose within the company's forecast as shoppers stocked up on holiday food and gifts. Wal-Mart increased post-Thanksgiving discounts to lure shoppers into its stores early in the season.
December Cooling
Weekly surveys suggest the November spending boom may not be sustained. Holiday sales declined in the seven days ended Dec. 15 for the third straight week, according to ShopperTrak RCT Corp. This year's holiday season may be the weakest since 2002, according to the National Retail Federation.
December has produced ``a little slower start to the season than we had hoped,'' Brad Anderson, chief executive officer of Best Buy Co., the largest U.S. consumer-electronics retailer, said in a Dec. 18 interview. ``That's pretty much the same pattern for the past few years. We're hoping that we'll see what we've seen in the past.''
Best Buy this week reported a 52 percent jump in profit for the quarter ended Dec. 1 and raised its annual forecast on demand for flat-panel televisions, computers and video-game consoles.
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