WASHINGTON: Americans boosted spending in November as their incomes continued to tick up, a sign the economic expansion remains on track despite sluggishness overseas.
Personal spending, measuring what households paid for everything from dental care to cars, rose 0.3% in November from a month earlier, the Commerce Department said Wednesday. Spending was flat in October after rising 0.2% in September.
Personal incomes, representing Americans’ pretax earnings from salaries and investments, increased 0.3% last month after climbing 0.4% in October. Economists surveyed by The Wall Street Journal had expected spending to rise 0.3% and income to climb 0.2%.
Some of the figures on consumer spending became public Tuesday evening in what the Commerce Department described as an “inadvertent release” on its website. The department’s Bureau of Economic Analysis said in a statement it “will take steps to ensure that this does not happen again and will take all appropriate action to safeguard economic data.”
Consumer spending is the U.S. economy’s linchpin, representing more than two-thirds of economic output. Solid household spending in recent months has enabled the economy to grow steadily despite numerous obstacles, including a strong dollar and weak overseas demand that have pinched American factories.
The economy grew at a 2% annual pace in the third quarter, the Commerce Department said this week. Many economists expect growth to clock in at roughly the same rate for the final three months of 2015.
Wednesday’s report showed consumers stepped up spending broadly in November, particularly on goods, boding well for holiday retailers. Spending on goods climbed 0.6%, driven by purchases of long-lasting items like cars and refrigerators. Spending on services grew 0.2%.
Even with the higher outlays, households maintained a decent level of savings. The personal saving rate slipped to 5.5% in November from 5.6% a month earlier but remained at the second-highest level since the start of 2013.
The Federal Reserve cited steady household spending as a factor in its decision to raise interest rates this month for the first time in a decade. The central bank said in a statement after its latest policy meeting that consumer spending had increased “at solid rates in recent months.”
“I feel confident about the fundamentals driving the U.S. economy, the health of U.S. households and domestic spending,” Federal Reserve Chairwoman Janet Yellen said in a news conference after the meeting. She added that “consumers are in much healthier financial condition. Their income prospects have improved. We see them buying a lot of cars.”
Wednesday’s report also hinted at economic sluggishness, with inflation continuing to run at a historically weak pace. The price index for personal consumption expenditures–the central bank’s preferred inflation gauge-was flat in November from the prior month. From a year earlier, prices were up 0.4%, a historically weak level but the highest year-over-year increase of 2015.
Core prices, which remove food and energy costs, grew 0.1% from October and 1.3% from a year earlier. November marked the 43rd consecutive month in which price growth fell short of the Fed’s 2% annual target.
