Keeping the nation’s cash registers ringing, consumers boosted their spending in November by the largest amount in four months, raising hopes shoppers will act more like Santas than Scrooges during the holidays.
That’s important — not only to retailers but also to the economy at large. Consumers are a major force shaping overall economic activity.
Thus far, they seem to be holding up fairly well to the strains stemming from the real-estate bust, where owners have anxiously watched the value of their homes either drop or not go up anywhere near as much as they had during the housing boom.
The Commerce Department reported Friday that consumer spending rose 0.5 percent last month. That was up from a 0.3 percent gain in the previous month and was the strongest showing since July.
“It is clear that Santa Claus came to town early with this report,” said Richard Yamarone, economist at Argus Research. “You can’t underestimate the consumer.”
With Christmas falling on Monday, Saturday is expected to be the busiest shopping day. Retailers are pulling out all the stops to hit their holiday sales goals by expanding hours in the final days before Christmas and ratcheting up discounts.
Friday’s report also showed that Americans’ incomes — the fuel for future spending — rose a modest 0.3 percent for the second month in a row.
The income and spending figures aren’t adjusted for inflation.
In other economic news, manufacturers saw demand for big-ticket goods rebound last month, the department said in a second report. Orders for costly manufactured goods went up 1.9 percent, a turnaround from an 8.2 percent plunge in October.
David Huether, chief economist at the National Association of Manufacturers, said the report provided “a modest amount of holiday cheer for American manufacturers.”
Together the two government reports suggest that the economic expansion is not in danger of fizzling out, despite strains from the deepening housing slump.
The ailing housing market was the main reason why economic growth slowed to a 2 percent pace in the late summer.
As troubles linger from housing, more sluggish performances are expected in the months ahead. However, some economists — cheered by the latest consumer spending figures — think economic growth in current quarter could prove stronger than most had thought.
Thus far, consumers are doing their part to help keep the economy growing.
In November, consumers boosted spending on big-ticket “durable” goods — such as cars and appliances expected to last at least three years — by a strong 1.2 percent, the most since July. Spending on “nondurables” such as food and clothes, rose by a solid 0.7 percent, after a 0.6 percent cut the month before. Spending on services increased 0.4 percent, following a 0.6 percent rise.
With spending growth outpacing income growth, Americans’ personal savings rate — savings as a percentage of after-tax income — dipped to negative 1.0 percent in November, the worst showing since August.
In the manufacturing report, factories saw new orders rise in November for computers and communications equipment, as well as cars and airplanes. But demand for machinery, electrical equipment and primary metals, including steel, ebbed.
Manufacturers are having to deal with some fallout related to problems in the housing market as well as the struggling automotive industry.
There was some encouraging news Friday about inflation.
An inflation measure tied to the income and spending report showed “core” prices — excluding food and energy — moderated last month. These prices rose 2.2 percent over the last 12 months ending in November. That was an improvement from the 2.4 percent gain reported for the 12 months ending in October.
Even so, core inflation is still higher than the Fed would like.
Fed chairman Ben Bernanke and his colleagues, however, predict inflation will continue to ease as the economy slows to a more sustainable pace.
Given that, the central bank has felt comfortable holding interest rates steady since August. Economists believe the Fed probably will leave rates where they are well into next year.