Consumer spending, incomes up
November inflation measure marks 11-month peak
WASHINGTON — U.S. consumer spending rebounded in November after a weak showing in October, while a key inflation gauge posted the fastest year-over-year increase in 11 months.
Spending increased 0.3 percent in November after an essentially flat reading in October and a 0.2 percent gain in September, the Commerce Department said Wednesday. Personal income rose a solid 0.3 percent in November, reflecting solid gains in wages and salaries, after a 0.4 percent October increase.
Economists are predicting that further improvement in the job market will support consumer spending in coming months.
Paul Ashworth, chief U.S. economist at Capital Economics, said the new economic data supported his view that the overall economy will expand at a moderate 2 percent rate in the current October-December quarter, helped by solid growth in consumer spending.
“Even if investment ends up being a bit weaker than we were expecting, real consumption growth is on track for a 2.5 percent annualized gain in the fourth quarter,” Ashworth said in a research note. Consumer spending grew at a 3 percent rate in the July-September quarter.
U.S. consumer sentiment rose in December to its highest level since July, lifted in part by low inflation, which has boosted Americans’ purchasing power.
The University of Michigan’s consumer sentiment index, released Wednesday, rose to 92.6 from 91.3 in November. That’s just below this year’s average of 92.9, the highest annual average in 11 years.
The mood of consumers has been lightened this year by steady hiring, which has brought the unemployment rate down to a seven-year low of 5 percent. There are also early signs that businesses are offering higher pay to attract and keep workers.
A key inflation gauge in the Commerce Depart-
ment’s consumer spending report was up 0.4 percent in November compared with a year ago, the biggest yearover-year jump since last December. Inflation is being closely watched by the Federal Reserve to determine the pace for moving interest rates higher.
The Fed raised a key rate for the first time in nearly a decade last week by onequarter point to 0.5 percent. Chairman Janet Yellen said the Fed will be closely watching progress in meeting the Fed’s 2 percent inflation target to help determine the pace of future rate changes. Many economists believe the Fed will raise rates three or four times in 2016.
The 0.4 percent yearover-year increase in the inflation gauge tied to consumer
spending came after a 0.2 percent yearly rise in October. It was the biggest 12-month jump since a 0.8 percent increase in December last year.
Orders for U.S. capital goods dropped in November for the first time in three months, showing that businesses began tempering new investment after a thirdquarter surge.
Bookings for nonmilitary equipment excluding planes declined 0.4 percent after a 0.6 percent October gain that was about half as much as initially reported, data from the Commerce Department showed Wednesday. The value of orders for all durable goods — items meant to last at least three years — was little changed.
The pause in equipment orders represents one of several challenges facing American producers, who are contending with a strong dollar,
tepid overseas demand and a recent inventory overhang. At the same time, resilient consumer demand that includes steady growth in auto sales is helping soften the blow to manufacturers.
“Business investment is still somewhat shaky, given the state of the manufacturing sector and the fact that it’s been underperforming the rest of the economy,” said Gennadiy Goldberg, U.S. rates strategist at TD Securities LLC in New York. “But given the state of the overall economy and the fact that the Federal Reserve sees it strong enough to start hiking rates, you’re going to get improvement over the coming months.”