Consumer Spending in U.S. Increases for Third Month (Update3)
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By Timothy R. Homan
Feb. 1 (Bloomberg) -- Spending by U.S. consumers increased in December for a third consecutive month, signaling the biggest part of the economy will contribute more to growth in coming months.
The 0.2 percent increase in purchases was less than anticipated and followed a 0.7 percent gain in November that was larger than previously estimated, Commerce Department figures showed today in Washington. Incomes climbed 0.4 percent, exceeding expectations.
Retailers such as Amazon.com Inc. are posting profits on increased sales as Americans spent more this past holiday season than the year before. Employment is key to propelling bigger gains in spending, one reason the Obama administration is proposing a fiscal 2011 budget today that calls for $100 billion in additional stimulus focusing on jobs.
“Consumers have the wherewithal to support good spending, however they are going to be reticent until they see a few good months of job gains,” said Craig Thomas, a senior economist at PNC Financial Services Group Inc. in Pittsburgh, who correctly forecast the gain in spending. “2010 is lined up to be a moderately good year.”
Stock-index futures held earlier gains following the report. The contract on the Standard & Poor’s 500 Index rose 0.6 percent to 1,076.5 at 9:10 a.m. in New York. Treasury securities fell.
The median estimate of 65 economists surveyed called for a 0.3 percent increase in spending, after an originally reported gain of 0.5 percent the prior month. Projections ranged from no change to 0.7 percent.
Income Gains
The gain in incomes followed a 0.5 percent increase in November and exceeded the 0.3 percent median estimate in the Bloomberg survey. Wages and salaries climbed 0.1 percent in December after increasing 0.4 percent the prior month.
Today’s report showed prices were stabilizing. The inflation gauge tied to spending patterns rose 2.1 percent from December 2008, less than the survey median forecast.
The Fed’s preferred price measure, which excludes food and fuel, climbed 0.1 percent in December from the previous month and was up 1.5 percent from a year earlier.
Adjusted for inflation, spending climbed 0.1 percent following a 0.4 percent rise the prior month.
Because the increase in spending was smaller than the gain in incomes, the savings rate rose to 4.8 percent from 4.5 percent the prior month.
Disposable income, or the money left over after taxes, increased 0.4 percent.
Better Sales
Amazon, the world’s largest Internet retailer, posted profit and sales that beat analysts’ estimates and said revenue growth may accelerate this quarter as consumers start spending more following the recession. Sales may rise as much as 43 percent to $7 billion in the first quarter, more than last year’s 18 percent growth, the Seattle-based company said last week in a statement. Analysts surveyed by Bloomberg had estimated sales of $6.42 billion.
Inflation-adjusted spending on durable goods, such as autos, furniture, and other long-lasting items, climbed 0.2 percent in December after rising 2.3 percent the prior month.
Purchases of non-durable goods decreased 0.8 percent, and spending on services, which account for almost 60 percent of all outlays, increased 0.4 percent.
The economy grew at a 5.7 percent annual rate in the fourth quarter, exceeding the median forecast of economists surveyed, figures from the Commerce Department showed last week. Consumer spending, which accounts for 70 percent of the economy, climbed at a 2 percent pace, also exceeding expectations.
To contact the reporter on this story: Timothy R Homan
