Bloomberg News

Consumer Spending in U.S. Probably Climbed as Incomes Grew

November 23, 2011

Nov. 23 (Bloomberg) -- Consumer spending in the U.S. probably climbed in October as incomes grew by the most since May, indicating the biggest part of the economy will bolster the recovery, economists said before a report today.

Household purchases rose 0.3 percent after increasing 0.6 percent in September, according to the median estimate of 82 economists surveyed by Bloomberg News. Orders for durable goods other than transportation stabilized in October after rising the most in six months, separate figures may show.

An October gain in household spending, which accounts for about 70 percent of the economy, bodes well for the holiday shopping season that kicks off this week. Improving demand and the year-end expiration of a tax break may spur companies to buy more equipment in the final months of 2011, helping the U.S. weather any damage caused by Europe’s debt crisis.

“The economy is firming,” said Millan Mulraine, a senior U.S. strategist at TD Securities in New York. “Consumers are adding to the economic momentum. The outlook for manufacturing remains positive.”

The Commerce Department’s spending report is due at 8:30 a.m. in Washington. Economists’ forecasts ranged from 0.1 percent to 0.6 percent.

Incomes grew 0.3 percent, according to the survey median.

Also at 8:30 a.m., the Commerce Department may report October orders for goods meant to last at least three years, excluding airplanes and automobiles, were little-changed after jumping 1.8 percent the prior month, the most since March, the Bloomberg survey median showed.

Boeing Bookings

In the same report, a projected 1.2 percent drop in total bookings for durable goods would reflect a plunge in demand for commercial aircraft, which is often volatile, economists said. Chicago-based Boeing Co. said it received orders for seven aircraft in October, down from 59 placed the previous month.

While exports, which climbed to a record in September, are helping factories keep assembly lines running, manufacturers may also get help in the final months of the year as businesses rebuild inventories that were slashed in the third quarter.

Gross domestic product climbed at a 2 percent annual rate from July through September, less than projected and down from 2.5 percent prior estimate, revised Commerce Department figures showed yesterday. Excluding a reduction in stockpiles, so-called final sales rose 3.6 percent, the most since 2010’s fourth quarter.

Investors are more concerned about the fallout from Europe, where policy makers are struggling to contain a financial crisis. The Standard & Poor’s Supercomposite Retailing Index has increased 1.3 percent since the end of last year compared with a 5.5 percent decline in the broader S&P 500.

Sentiment Lift

Lower fuel prices may be helping to lift consumers’ moods. The Thomson Reuters/University of Michigan final index of consumer sentiment, due at 9:55 a.m., may have climbed to 64.5 this month, the highest since June, economists in the Bloomberg survey forecast.

Also today, a report from the Labor Department may show initial claims for jobless benefits rose to 390,000 last week from 388,000 the prior week, according to the Bloomberg survey median. The data are due at 8:30 a.m.

Retailers like Macy’s Inc. and Kohl’s Corp. have said they plan to use more discounts to lure shoppers. The day after the Thanksgiving holiday tomorrow is known as Black Friday, the unofficial start of the holiday shopping season.

Affluent Shoppers

More affluent consumers are holding up “pretty well,” Stephen Sadove, chief executive officer of luxury retailer Saks Inc., said in a Bloomberg Television interview on Nov. 18. The average income of the Saks shopper is $200,000 a year, he said.

Other retailers are less optimistic as unemployment has hovered near or above 9 percent for more than two years and companies limit hiring.

“Until the U.S. begins to see robust improvement in jobs and signs of recovery in the housing market, we believe consumer spending will likely continue to be soft and uneven,” Doug Scovanner, chief financial officer at Target Corp., the second- largest U.S. discount retailer, said on a Nov. 16 call with analysts.

Some Federal Reserve policy makers said the central bank should consider additional easing to lower borrowing costs and boost job creation, according to minutes of their Nov. 1-2 meeting released yesterday.

--With assistance from Chris Middleton in Washington. Editors: Carlos Torres, Gail DeGeorge

To contact the reporter on this story: Sho Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


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