Consumer Spending Sputters on Weak Income Growth

Friday, 23 Dec 2011 08:35 AM

 

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U.S. consumer spending rose less than expected in November as tepid income growth put a squeeze on households, according to a government report on Friday that suggested slowing momentum in demand.

The Commerce Department said consumer spending ticked up 0.1 percent after rising by the same margin in October.

Economists polled by Reuters had expected spending, which accounts for two-thirds of U.S. economic activity, to rise 0.3 percent last month.

When adjusted for inflation, spending rose 0.2 percent last month after a similar gain in October. The government on Thursday revised down third-quarter consumer spending growth to a 1.7 percent annual pace from 2.3 percent because of a slump in spending at hospitals.
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November's anemic consumer spending is unlikely to change views that economic growth in the fourth could top a 3 percent pace, accelerating from the July-September period's 1.8 percent rate.

Income ticked up 0.1 percent last month, the weakest reading since August, after increasing 0.4 percent in October. Last month's increase was below economists' expectations for a 0.2 percent rise.

Taking inflation into account, disposable income was flat after rising 0.3 percent in October.

The saving rate dipped to 3.5 percent last month from 3.6 percent in October. Savings slowed to annual rate of $400.9 billion from $419.1 billion the prior month.

The report showed subsiding inflation pressures, which should help to support spending.

A price index for personal spending was flat last month after falling 0.1 percent in October. In the 12 months through November, the PCE index was up 2.5 percent, the smallest rise since April. That followed a 2.7 percent increase in October.

A core inflation measure, which strips out food and energy costs, edged up 0.1 percent last month after a similar gain in October. In the 12 months through November, core PCE rose 1.7 percent after increasing 1.7 percent in September.

The Federal Reserve would like this measure close to 2 percent.

© 2014 Thomson/Reuters. All rights reserved.

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