Mon, Dec 17, 2012 - Page 15 News List

Economists predict rise in US spending, home sale

Bloomberg

Consumer spending probably rose last month as Americans set aside the threat of higher taxes next year while shopping for the holidays, economists said before reports are to be released this week.

Household purchases increased 0.4 percent last month after declining 0.2 percent in October, according to the median estimate from 66 economists surveyed by Bloomberg ahead of the figures from the US Department of Commerce to be released on Friday.

Other reports may show home sales and demand for long-lasting goods climbed.

“The economy is holding in,” said Jim O’Sullivan, chief US economist for High Frequency Economics Ltd in Valhalla, New York. “For the household sector, the housing numbers have been quite good. The labor market numbers are OK.”

A jump in auto sales last month is among the evidence that the world’s largest economy is rebounding from the damage caused by Hurricane Sandy.

Improving property values and falling fuel costs are helping brace consumers against the more than US$600 billion in tax increases and government spending cuts that will take effect next month without action from US Congress.

“There is a lot of nervousness about the ‘fiscal cliff,’ so I think how that gets resolved will be important to what happens next,” O’Sullivan said.

Retail sales rose 0.3 percent last month after a 0.3 percent decrease in October, the Commerce Department reported the week before last. Ten of 13 major categories showed gains, led by a 1.4 percent increase at auto dealerships, a 2.5 percent jump at electronics outlets and a 0.9 percent pickup at clothing stores.

Cars and light trucks sold last month at a 15.5 million annual rate, the fastest pace since February 2008 and up from 14.2 million in October when Sandy kept East Coast shoppers away during dealers’ busiest time of the month, data from Ward’s Automotive Group show.

Limited Brands Inc, the operator of the Victoria’s Secret lingerie chain, reported comparable sales rose 5 percent last year, topping projections for a 3.4 percent gain. The Columbus, Ohio-based Limited Brands said Sandy, which swept ashore on Oct. 29, reduced its comparable store sales growth by as much as 2 percentage points.

From July to September, household purchases contributed 1 percentage point to US economic expansion, which proceeded at a 2.7 percent annual rate.

The rate of economic growth for last quarter will be revised up to 2.8 percent when the Commerce Department issues updated figures on Thursday, according to a median forecast in a Bloomberg survey.

An improving housing market is supporting the economy. Residential construction has contributed to growth for six consecutive quarters, the best showing since 2005, as builders begin to restore the inventory of new homes.

After three consecutive gains, homebuilding took a breather last month, economists surveyed predicted.

Housing starts fell to 873,000 annual rate after reaching a four-year high 894,000 rate in October, economists project a Commerce Department report will show on Wednesday.

Building permits, a proxy for future construction, probably rose to an 875,000 annual pace.

Nonetheless, the US government spending cuts and tax increases that Federal Reserve Chairman Ben Bernanke termed the fiscal cliff during congressional testimony in February is starting to show up in some measures of consumer confidence.

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