updated 12/23/2004 9:44:20 AM ET 2004-12-23T14:44:20

U.S. consumers kept a grip on their wallets in November, spending less heartily and saving more, while the nation’s factory sector enjoyed a surprisingly strong business pickup, the government reported Thursday.

Major Market Indices

The two reports from the Commerce Department pointed to steady though unspectacular expansion that left markets largely unmoved in thin trading just ahead of the Christmas holiday weekend. U.S. bond and stock markets are closed on Friday.

Consumer spending edged up a slim 0.2 percent in November — a fraction of October’s 0.8 percent jump — as purchases of new cars dropped sharply. The figure is closely monitored since spending fuels two-thirds of national economic activity.

The October spending figure was revised up from the department’s previous report showing a 0.7 percent rise. After adjusting for inflation, November’s personal spending was flat after posting a 0.4 percent gain in October.

Incomes were up 0.3 percent last month after a hefty 0.6 percent increase a month earlier. Income and spending were in line with Wall Street economists’ forecasts and may have reflected some income losses because of hurricanes that hit Southeastern states in late summer and fall.

“The income numbers have been distorted a little by the hurricanes and they are just now coming back to normal, “said economist Mark Vitner of Wachovia Securities in Charlotte, N.C.

“But we have seen stronger job growth and so we have got fairly decent wage and salary growth,” he added.

A separate report from the Labor Department showed new claims for U.S. jobless benefits up a slightly higher-than-expected 17,000 last week to 333,000.

Bonds were down modestly after the reports were published but traders expected stock prices to gain slightly, partly because the strong durable goods report implied that corporate profits should remain on an upward trend.

The personal income report showed the personal savings rate increased to a still slight 0.3 percent in November after a slim 0.1 percent in October.

U.S. factories picked up a healthy surge in orders last month, up a sharper-than-expected 1.6 percent in November, pointing to relatively healthy activity in the nation’s factory sector as the year headed to a close.

The increase was a bounce back from a revised 0.9 percent decline in October that was originally reported as a larger 1.1 percent drop. The November orders pickup was the strongest in four months, since a 1.9 percent increase in July, handily outstripping Wall Street economists’ forecasts for a 0.6 percent gain.

The biggest gain in November orders was for transportation goods, up 8.2 percent following a slim 0.3 percent rise a month earlier. It was the strongest rise in transportation orders since an 11 percent surge last February.

Transportation accounts for more than a quarter of overall durable goods, so any pickup in these orders has a significant impact on the total. Excluding transportation, durables orders were down 0.8 percent after a 1.3 percent October decrease.

Analysts said there was enough in the report to add to a sense of optimism about the industrial outlook.

“Even though the ... (ex-transportation) number fell, a lot of the details showed some nice gains, plus the revisions were positive as well,” commented Lara Rhame, a foreign exchange strategist with Credit Suisse First Boston in New York.

Analysts have been watching for indications that a weakening U.S. dollar, which makes American-made products cheaper in foreign markets, will bolster orders for manufactured items and there were signs that may be happening.

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