Consumer spending up 0.2%

Jeannine Aversa

Thursday, Dec. 23, 2004 | 9:40 a.m.

WASHINGTON -- Consumers kept a closer eye on their wallets as they moved into the holiday shopping season, boosting their spending by a modest 0.2 percent in November.

The increase, reported by the Commerce Department today, came after consumers splurged in October and ratcheted up spending by a brisk 0.8 percent, according to revised figures. That was slightly stronger than initially reported and represented the biggest advance in spending since July.

Americans' incomes, meanwhile, grew by 0.3 percent in November, down from a 0.6 percent rise the month before.

The rise in spending for November was slightly weaker than the 0.3 percent increase some economists were forecasting; the income growth figure, however, was slightly better than the 0.2 percent gain analysts anticipated.

Consumer spending accounts for roughly two-thirds of all economic activity. Thus, their behavior is closely watched by economists. Although consumers are still in good shape, high energy prices and a still recovering jobs market are making some, notably low and middle income Americans, more cautious spenders.

The spending and income figures aren't adjusted for price changes.

When adjusted for inflation, consumer spending in November was flat, compared with a solid 0.4 percent rise in October.

Other reports released today provided a mixed picture of economic activity.

The decline left sales at a seasonally adjusted annual rate of 1.1 million units and suggested that the high-flying housing market is losing some altitude. The drop, the first since July, followed a 4.2 percent increase in October.

By region, new-home sales fell in the Northeast, Midwest and West but rose in the South.

The average price of a new home in November was $268,100, the lowest since September. The median sales price -- where half sell for more and half for less -- was $206,300, the lowest since December 2003.

The nation's manufacturing sector, which was hardest hit by the 2001 recession, has had a sometimes bumpy road to get back on firm ground.

Orders for automobiles, airplanes and other transportation equipment went up by a strong 8.2 percent in November, compared with a 0.3 percent rise the month before. But excluding orders for transportation equipment, other orders fell by 0.8 percent in November, the second straight month of decline.

On the consumer front, shoppers in November trimmed spending on big-ticket durable goods by 2.4 percent, compared with a 0.9 percent increase in October.

Spending on nondurables, such as clothes, rose by 0.4 percent in November, down from a 1.6 percent gain. Spending on services increased by 0.6 percent, up from 0.4 percent .

Federal Reserve policy-makers, feeling comfortable about economic growth, raised interest rates for a fifth time this year on Dec. 14. That left a key rate at 2.25 percent.

Even though the economy is growing solidly, the job market is still in a somewhat slow recovery mode. The nation's payrolls grew by 112,000 in November, down from 303,000 in October.