12/21/07: MSNBC Breaking News: Consumer spending surges by 1.1%, most in 3.5 years

U.S. consumer spending surged in November Increase was largest in 3 1/2 years

WASHINGTON - Consumers in the U.S. put aside worries about slumping home sales and soaring gasoline prices and headed to the malls in November, pushing spending up by the largest amount in 3 1/2 years.

The Commerce Department reported Friday that consumer spending surged by 1.1 percent last month, nearly triple the October gain. The gain reflected various promotional efforts by retailers such as heavy discounting and longer store hours at the start of the holiday shopping season.

The November advance was the biggest one-month jump since a 1.2 percent rise in May 2004 and was significantly above the 0.7 percent analysts had expected. Incomes were also up last month, rising by 0.4 percent, double the October increase but slightly below the advance that had been expected. Story continues below ↓advertisement

An inflation gauge tied to spending showed a 0.6 percent increase in November, the biggest jump in more than two years, reflecting last month's big surge in gasoline prices. Excluding energy and food, prices were up 0.2 percent. Core inflation is up 2.2 percent over the past 12 months, above the upper range of the Federal Reserve's comfort zone of 1 percent to 2 percent.

The big jump in spending came at a critical time for retailers _ the start of the all-important holiday shopping season. But there have been more recent signs that sales slowed in December.

Consumer spending is closely watched because it accounts for two-thirds of total economic activity. Many economists believe that overall economic growth will be at a barely discernible rate of 1 percent in the current quarter, as the country struggles with the fallout from the housing downturn and a spreading credit crisis that has made bank loans harder to get for individuals and businesses.

While the risks of a recession have risen, the Federal Reserve is fighting to avert a full-blown downturn by cutting interest rates. It has not been as aggressive as financial markets want, however, because of Fed worries about inflation pressures.

Responses to this message:

• Here's a phrase you should look up, X-Man. Xur
• Here's a phrase you should look up X-Man
• Here's another phrase you should look up Xur
• Look, it's just the facts of the situation X-Man
• Dude, you're insane. Xur
• Against stupidity the gods themselves contend in vain Coaster
• Amen, Coaster. Heywood_JBlowme

Post a response to this discussion thread