updated 12/22/2005 11:44:41 AM ET 2005-12-22T16:44:41

Consumers increased spending moderately in November even though the growth in their incomes slowed a bit, raising doubts about how strong the Christmas sales season will be.

Major Market Indices

The Commerce Department said personal spending rose by 0.3 percent last month, slightly below the 0.4 percent gain that Wall Street had been expecting. Incomes rose by 0.3 percent last month, right in line with expectations.

The holiday shopping season has turned in a mixed performance so far with the nation’s retailers expected to increase discounting in the final days before Christmas in the hopes of making up for slower-than-expected sales since Thanksgiving.

The report on incomes and spending had good news on inflation. An inflation gauge tied to personal consumption fell by 0.4 percent, the biggest one-month decline on record. Excluding food and energy, inflation was up a slight 0.1 percent in November.

For the past 12 months, inflation excluding food and energy has risen a moderate 1.8 percent, the best performance since March of 2004, while overall inflation is up 2.7 percent.

The personal consumption inflation index is favored by the Federal Reserve, which has boosted interest rates 13 times in an effort to make sure that rising energy prices do not spill over into more widespread inflation problems.

The 0.3 percent rise in incomes followed a stronger 0.5 percent gain in October. Income growth last month was supported by a sharp rebound in job growth with businesses adding 215,000 workers to their payrolls following two weak months which saw heavy job layoffs in the Gulf Coast states affected by the hurricanes.

The 0.3 percent rise in consumer spending was an even larger 0.7 percent gain when inflation was factored out. That inflation-adjusted increase was the biggest rise since a 1.1 percent jump in July, a month when consumers spent heavily on new car purchases in response to attractive discount offers.

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