US consumer, business spending gather pace in Nov.

Tuesday, 21 December 2010 00:02 -     - {{hitsCtrl.values.hits}}

WASHINGTON: Spending by US consumers and businesses probably accelerated in November, a signal the economy is speeding up at the end of the year, economists forecast before reports this week.

Household purchases rose 0.5% after a 0.4% increase in October, according to the median estimate of 62 economists surveyed ahead of December 23 figures from the Commerce Department. The same day, another report from the agency may show demand for durable goods excluding cars and aircraft climbed 2%.

Fewer firings and rising incomes are boosting consumer confidence, making it more likely spending, which accounts for about 70% of the economy, will keep improving. At the same time, factories are ramping up production as gains in exports reinforce growing demand from US companies, pointing to a more balanced and durable recovery.

 “We really have started to see improvements in momentum and more broad-based improvements,” said Russell Price, a senior economist at Ameriprise Financial in Detroit. “We’re on the precipice of getting to an economy that’s sustainable without Fed stimulus.” The consumer spending report also will show incomes rose 0.2% last month after increasing 0.5% in October, according to the survey median.

Improving household balance sheets may be helping boost demand during the Christmas holiday period. The International Council of Shopping Centers on December 14 revised its November-December holiday-season sales forecast up by 0.5 percentage point to a range of 3.5% to 4%.

 “All the brands around the world are having, so far so good, a very great Christmas,” John Demsey, group president of Estee Lauder, said in an interview December 15. “Consumer confidence is up and it’s really about the power of the brands and pent up demand that consumers have.” Auto dealers also are among retailers seeing improved demand. Car sales in November rose to a 12.26 million unit pace, the highest since the government’s cash-for-clunkers program in August 2009, industry data showed this month.

The Commerce Department’s report on durable goods will show total orders fell 0.7%, reflecting a drop in aircraft demand. Bookings for business equipment excluding defence and planes, items like computers and machinery, rose 3%, according to the survey.

“We have seen now an extended period of time of recovery in the components business,” Paul Reilly, chief financial officer of Arrow Electronics, said last week at a conference in New York. Melville, New York-based Arrow is a distributor of electronic components and computer products to industrial customers.

The improving economy has boosted stock prices. The Standard & Poor’s 500 Index has risen 22% since reaching a 10-month low on July 2. It is up 5.4% so far this month.

The economy grew at a 2.8% annual pace in the third quarter, more than the 2.5% estimated last month, according to the median forecast of economists surveyed. The Commerce Department is scheduled to release its second revision for the period on December 22.

Economists in the past two weeks have boosted projections for fourth-quarter growth after the government reported better-than-projected retail sales for November and the Obama administration reached a compromise with congressional Republicans to extend Bush-era tax cuts and introduce new reductions.   JPMorgan Chase chief US economist Michael Feroli forecast the economy will grow at a 3.5% pace from October through December, up from a prior estimate of 2.5%.

Housing, the industry that triggered the worst recession in seven decades, is struggling to recover after a homebuyers’ tax credit expired and foreclosures keep adding to inventory.

Sales of new and existing homes increased to a combined 5.05 million annual rate in November from 4.71 million the prior month, according to economists surveyed. Purchases averaged a 5.7 million pace in the first six months of the year when the tax break was in effect, and then slumped to 4.12 million in July, the weakest since comparable records began in 1999.

The National Association of Realtors is scheduled to release figures on existing home sales December 22. Economists surveyed projected demand for previously owned houses rose 7.2% to a 4.75 million rate last month.

The Commerce Department will issue new-home sales data December 23. Purchases climbed 6% to a 300,000 pace, according to the survey.

Other reports this week will show initial jobless claims held at 420,000 last week and the Thomson Reuters University of Michigan final index of consumer sentiment for December increased to 74.5, the highest reading in six months, according to the survey median.

Americans not so optimistic about 2011, poll says

WASHINGTON: Americans are ringing out 2010 on a worried note, feeling grim about the job market , the cost of living and their retirement savings, according to a poll released last week.

Three-quarters of those surveyed are dissatisfied with national conditions, and nearly half fear the economy will take a long time to recover, according to the poll by the Pew Research Center for the People & the Press.

Nearly nine in ten describe U.S. economic conditions as poor or fair, it said. However, the number of people calling conditions fair, rather than poor, has risen slightly since October.

Looking ahead, 55 per cent think 2011 will be better than this year, and 31 per cent say the coming year will be worse.

That’s more pessimistic than a year ago, when 67 per cent thought 2010 would be better than 2009, it said.

“There was a good deal more optimism last year than this year,” said Carroll Doherty, a Pew associate director. “Maybe they had a sense the economy was turning a corner, which didn’t turn out quite to be the case.

“This year maybe people are a little more tempered,” he said.

Almost half, or 48 per cent, said it will be a long time before the economy recovers, while a third predicted it will recover soon, the survey said.

Four out of five people said jobs in their communities are hard to come by, and two out of three say jobs in their line of work are difficult to find, it said.

Almost half said they or someone in their household has been without a job and looking for work in the past year.

Nevertheless, two-thirds of working people said their employers are in excellent or good financial health.

While 57 per cent said it is difficult to afford the things they really want, 40 per cent said it is easy.

Two thirds said it is difficult to save for retirement.

Asked to assess their personal financial situation, 40 per cent said fair, 30 per cent said good, 23 per cent said poor, 5 per cent said excellent and 2 per cent did not know.

About a quarter said they owe more than they can afford on credit cards and other non-mortgage debts.

The national poll was conducted December 1-5 by telephone among 1,500 adults. The margin of error was plus or minus 3 per centage points, Pew said