Wed, Dec 25, 2013 - Page 15 News List

US spending buoyed by higher household income


US consumer spending continued to gain pace in the key shopping month last month, buoyed by a slight rise in household income, the US Department of Commerce reported on Monday.

Spending was up 0.5 percent — which includes Thanksgiving and the start of the Christmas shopping season — compared with October.

The increase was higher than the 0.4 percent recorded in October and came as household income ticked up by 0.2 percent after a disappointing 0.1 percent fall the previous month. Consumer spending accounts for more than two-thirds of US economic activity and is a keenly anticipated indicator.

The strong economic data sent the Dow Jones Industrial Average up 73.47 points (0.45 percent) to 16,294.61, while the broad-based S&P 500 advanced 9.67 (0.53 percent) to 1,827.99. Both were new records, building on record closes from Friday. Meanwhile, the tech-rich NASDAQ Composite Index added 44.16 (1.08 percent) at 4,148.90.

Monday’s data came on the heels of last week’s surprising upgrade to the third-quarter estimate of GDP growth and a move by the US Federal Reserve to scale back its bond-buying program due to the improving economy.

Barclays analyst Michael Gapen said the back-to-back consumption data for October and last month are “two of the strongest monthly readings for personal consumption in over a year and are consistent with our expectation that household spending would strengthen” due to better employment and wealth effects.

The better consumption data, along with other recent data, should encourage policymakers, yet weak inflation trends will “provide reason for caution,” Gapen said.

Naroff Economic Advisors chief economist Joel Naroff said the report suggested retailers had succeeded in luring customers to stores with a barrage of promotions around the annual “Black Friday” sales the day after Thanksgiving.

However, Naroff said that consumers’ savings took a hit from the higher spending last month and predicted customers would start cutting back.

Some retailers have complained of weak demand this month.

“All said, though, investors should like this report and it will make those at the Fed who thought that tapering is a good idea exhale a little,” Naroff said.

This story has been viewed 1290 times.

Comments will be moderated. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned.

TOP top