Personal spending rose less than forecast in November

Consumer spending rose less than forecast in November as wages declined for the first time in three months, signaling the biggest part of the U.S. economy may struggle to pick up.

Purchases rose 0.1 percent for a second month, Commerce Department figures showed today in Washington. Incomes also grew 0.1 percent, the weakest in three months, after a 0.4 percent rise in October. The median estimate for spending in a Bloomberg News survey of economists called for a 0.3 percent advance.

Unemployment at 8.6 percent has encouraged retailers such as Best Buy Co. and Target Corp. to use promotions to bring in customers as wages stagnate. Wrangling over tax cuts and the budget in Congress and Europe’s debt crisis represent risks early next year to faster growth in household purchases, which account for about 70 percent of the economy.

“In the absence of a significant pickup in income, we won’t see a big boost in spending,” said Yelena Shulyatyeva, an economist at BNP Paribas in New York. “The momentum will slow in the fourth quarter, but the economy is still growing.”

Projections among the 79 economists in the Bloomberg survey for spending ranged from increases of 0.2 percent to 0.6 percent. Economists had forecast incomes would rise 0.2 percent, according to the Bloomberg survey.

Stock-index futures pared gains after the report, with the contract on the Standard & Poor’s 500 Index expiring in March rising 0.3 percent to 1,253.1 at 8:57 a.m. in New York. The yield on the benchmark 10-year Treasury note climbed to 1.98 percent from 1.95 percent late yesterday.

Durable goods

Orders for durable goods jumped 3.8 percent in November, other figures from the Commerce Department showed.

Wages and salaries decreased 0.1 percent after a 0.6 percent gain, today’s data on income and spending showed. Disposable income adjusted for changes in prices and taxes was unchanged in November after a 0.3 percent.

The savings rate fell to 3.5 percent from 3.6 percent in October.

Adjusted for inflation, which are the figures used to calculate gross domestic product, consumer spending rose 0.2 percent for a second month.

The Fed’s preferred price index, which is tied to spending patterns and excludes food and fuel, increased 1.7 percent from November 2010, the same as in the 12 months ended in October.

The so-called core price index rose 0.1 percent for a second month, matching the median forecast of economists surveyed.

Third quarter

Gross domestic product climbed at a 1.8 percent annual rate from July through September, down from a prior 2 percent estimate, revised Commerce Department figures showed yesterday. Household purchases rose at a 1.7 percent pace, down from 2.3 percent.

Today’s report showed inflation-adjusted spending on durable goods increased 1.1 percent in November after a 1.3 percent gain. Outlays for non-durable goods, which includes gasoline, fell 0.1 percent last month.

Automakers did well last month. Sales of cars and light trucks advanced 3 percent in November to a 13.6 million seasonally adjusted annualized rate, the highest since August 2009, according to researcher Autodata Corp.

“The economy has been expanding moderately, notwithstanding some apparent slowing in global growth,” Federal Reserve policy makers said in their latest statement on Dec. 13 following a meeting. “Household spending has continued to advance.”

Retail discounting

Retailer Target began a three-day “Almost Last Minute Sale” on Dec. 8 with markdowns on such items as Stanley Black & Decker Inc. coffee makers and gift card giveaways. A week earlier, the discount chain held the “Big Toy Event” offering half off a second item.

“Retail has been very promotional and consumers have been value conscious,” Brian Dunn, chief executive officer at Best Buy, the world’s largest consumer-electronics retailer, said on a Dec. 13 conference call. “We purposely planned to take a leadership stance in the marketplace and stepped up our promotional efforts to do so.”

The outlook for the world’s largest economy into 2012 hinges in part on Europe, where policy makers are struggling to contain a financial crisis that began two years ago in Greece and is threatening to spread. There is also fiscal policy uncertainty in the U.S., where lawmakers are debating measures to cut the budget deficit by $1.2 trillion over 10 years.