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Business Title: U.S. Consumer Spending Rises for Fifth Month as Incomes Rebound Consumer spending rose in October for a fifth month as a rebound in incomes lifted the biggest part of the U.S. economy at the start of the final quarter of 2010. Household purchases advanced 0.4 percent after a 0.3 percent gain in September that was larger than previously estimated, Commerce Department figures showed today in Washington. Incomes climbed 0.5 percent and the Federal Reserve’s preferred measure of inflation was little changed, capping the smallest 12-month gain since records began five decades ago. More jobs and bigger paychecks may give consumers the confidence to boost purchases during the holiday season, benefiting retailers like Wal-Mart Stores Inc. The slowdown in inflation validates the Fed’s case for a second round of unconventional monetary stimulus. “It really looks like a recovery here,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Wages and salaries are strengthening, and we have really good momentum going into the holiday season.” Another Commerce Department report today showed orders for goods meant to last several years unexpectedly decreased in October. Demand for so-called durable goods dropped 3.3 percent after a revised 5 percent jump in September that was larger than previously estimated. Claims Drop Applications for unemployment benefits fell last week to the lowest level since July 2008, reinforcing evidence the labor market is healing, a report from the Labor Department also showed. Jobless claims declined by 34,000 to 407,000 in the week ended Nov. 20. The median projection of economists surveyed by Bloomberg News called for a drop to 435,000. Stock-index futures extended earlier gains after the reports. The contract on the Standard & Poor’s 500 Index maturing in December rose 0.2 percent to 1,186.5 at 8:55 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10- year note up to 2.83 percent from 2.78 percent late yesterday. The median estimate of 77 economists surveyed by Bloomberg News called for a 0.5 percent advance in spending. Projections ranged from increases of 0.2 percent to 0.8 percent. The Commerce Department revised September spending up from a previously reported 0.2 percent gain. Economists forecast incomes would climb 0.4 percent, according to the survey median. Wages Climb Wages and salaries advanced 0.6 percent, the biggest gain since May. Disposable incomes, or the money left over after taxes, rose 0.3 percent after adjusting for inflation. The savings rate increased to 5.7 percent from 5.6 percent, even as spending climbed, showing how growing incomes are helping American households repair tattered finances. Today’s report also showed inflation cooled. The Fed’s preferred price measure, which excludes food and fuel, was unchanged from the prior month and was up 0.9 percent from a year earlier, the smallest gain since records began in 1960. Today’s report showed that adjusted for inflation, which are the figures used to calculate gross domestic product, consumer spending increased 0.3 percent after a 0.2 percent increase the prior month. The economy grew at a 2.5 percent annual pace in the third quarter, more than 2 percent pace estimated last month, the Commerce Department reported yesterday. Business spending on new equipment and software advanced at a 17 percent pace and consumer spending rose by a more-than- forecast 2.8 percent, the biggest gain in four years. Holiday Sales Retailers are projecting a better holiday shopping period and are boosting discounts to bring more consumers to the stores. The National Retail Federation has forecast November-December holiday sales will rise by 2.3 percent from a year ago, the most since 2006. Wal-Mart, the world’s largest retailer, said this week it will match prices listed in competitors’ ads on Black Friday, the day after Thanksgiving. Savings will begin on Nov. 25 holiday and run through Nov. 27, with deals on electronics, home items and apparel. Auto dealers are among retailers seeing demand improve. Car sales in October rose to a 12.25 million unit annual pace, the highest since the government’s cash-for-clunkers program in August 2009, industry data showed this month. “The sales rate has been improving at a modest rate, each quarter moving up a little bit,” George Pipas, U.S. sales analyst at Ford Motor Co., said on a Nov. 3 conference call. “October’s results suggest that that trend could continue in the fourth quarter.”
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