Spending by Consumers Probably Increased: U.S. Economy Preview

Spending by Consumers Probably Increased: U.S. Economy Preview

Nov. 22 (Bloomberg) -- Consumer spending probably rebounded in October, showing that mounting unemployment is restraining, not derailing, the biggest part of the U.S. economy, analysts said before reports this week.

Purchases increased 0.5 percent after dropping by the same amount in September, according to the median estimate of 61 economists surveyed by Bloomberg News before a Commerce Department report due Nov. 25. Other figures may show orders for durable goods and home sales climbed.

Consumers added to their wardrobes, frequented restaurants and bought more automobiles last month even after the government’s trade-in incentive expired. A jobless rate that is projected to remain above 10 percent through the first half of next year means households will still be hard-pressed to boost spending further, limiting their contribution to growth.

“A business recovery has taken root, notably in output and sales, although not yet in employment,” said Neal Soss, chief economist at Credit Suisse in New York. “The recovery will likely be mediocre relative to previous recoveries following severe recessions.”

The labor market and reduced bank lending are some of the “headwinds” facing the economy, Federal Reserve Chairman Ben S. Bernanke said last week. To help ensure the economy doesn’t falter, Bernanke and his fellow U.S. central bankers will probably keep monetary policy unchanged well into 2010.

Vehicle Sales Rise

Auto industry data show sales of cars and light trucks rose to a 10.5 million unit annual pace in October, up 14 percent from the previous month. Purchases were still short of the 14.1 million rate reached in August when the government’s cash-for- clunkers plan, which expired near the end of that month, revived demand.

U.S. retailers last month increased sales 1.4 percent after a decline of 2.3 percent in September, according to Commerce Department figures released Nov. 16. Sales rose at department stores, restaurants and Internet-based businesses such as Amazon.com.

Most retailers have boosted profits by trimming costs and inventories. Saks Inc., the New York-based U.S. luxury retail chain, last week reported an unexpected profit, its first in more than a year, for the period ended Oct. 31.

“The current economic and retail environment remain uncertain,” Saks Chairman and Chief Executive Officer Stephen Sadove said on a Nov. 17 conference call with investors and analysts. “It’s a fragile period for everyone in this industry.”

Incomes Rise

The Commerce Department spending report on Nov. 25 may also show incomes grew 0.2 percent in October, the biggest gain in five months, after no change the previous month.

Even with that gain, a weak labor market continues to weigh on consumers’ ability to boost purchases. Payrolls fell by 190,000 last month, bringing total job losses to 7.3 million since the recession began in December 2007, the most of any contraction since the Great Depression.

President Barack Obama, seeking to halve job losses since the recession began, announced on Nov. 12 that he plans to hold a White House jobs summit. He said he’ll convene business executives and experts to seek solutions to spur job creation.

The job cuts are causing measures of consumers’ outlooks to weaken this month. The Conference Board’s confidence index, due Nov. 24, is forecast to fall, and the Reuters/University of Michigan gauge the next day is projected to drop from the previous month.

The S&P 500 rose as much as 64 percent from a 12-year low in March, closing at a 13-month high on Nov. 17.

Durable Goods

The increase in demand for automobiles likely contributed to a gain in bookings at factories. Orders for durable goods, those meant to last at least three years, probably rose 0.5 percent in October after a 1.4 percent surge, the first back-to- back increase since May, according to the median estimate ahead of a Nov. 25 report from the Commerce Department.

Excluding demand for transportation equipment, which tends to be volatile, orders probably increased 0.6 percent, the survey median showed.

The government’s revised figures for third-quarter gross domestic product, due on Nov. 24, may show the economy expanded at a 2.9 percent annual rate, compared with the 3.5 percent estimated last month, according to the survey median. The revision will reflect a bigger trade gap and weaker retail sales in September, economists said.

The worst housing slump in more than 70 years is showing signs of improvement, with government support in the form of a tax credit for homebuyers.

Existing Home Sales

The National Association of Realtors is expected to report tomorrow that purchases of existing homes rose 2.3 percent in October to an annual pace of 5.7 million, the highest level since July 2007, according to the survey median.

The Commerce Department on Nov. 25 may report that purchases of new houses rose 0.8 percent last month to a 405,000 annual pace, according to the Bloomberg survey median.

A measure of home prices is projected to fall at a slower pace. The S&P/Case-Shiller index of property values in 20 U.S. metropolitan areas was probably down 9.1 percent in September from a year earlier, the smallest decline in almost two years, the survey showed. The report is due on Nov. 24.



Bloomberg Survey
===============================================================
Release Period Prior Median
Indicator Date Value Forecast
===============================================================
Exist Homes Mlns 11/23 Oct. 5.57 5.70
Exist Homes MOM% 11/23 Oct. 9.4% 2.3%
GDP Annual QOQ% 11/24 3Q P 3.5% 2.9%
Personal Consump. QOQ% 11/24 3Q P 3.4% 3.2%
GDP Prices QOQ% 11/24 3Q P 0.8% 0.8%
Core PCE Prices QOQ% 11/24 3Q P 1.4% 1.4%
Case Shiller Quarterly 11/24 3Q -14.9% -10.5%
Case Shiller Quarterly 11/24 3Q 132.6 136.6
Case Shiller Monthly YO 11/24 Sept. -11.3% -9.1%
Case Shiller Monthly In 11/24 Sept. 146.0 147.0
Consumer Conf Index 11/24 Nov. 47.7 47.5
Richmond Fed Index 11/24 Nov. 7 8
FHFA HPI MOM% 11/24 Sept. -0.3% 0.1%
OFHEO HPI QOQ% 11/24 3Q -0.7% 0.4%
ABC Conf Index 11/24 Nov. 23 -45 -45
Pers Inc MOM% 11/25 Oct. 0.0% 0.2%
Pers Spend MOM% 11/25 Oct. -0.5% 0.5%
PCE Deflator YOY% 11/25 Oct. -0.5% 0.1%
Core PCE Prices MOM% 11/25 Oct. 0.1% 0.1%
Core PCE Prices YOY% 11/25 Oct. 1.3% 1.4%
Durables Orders MOM% 11/25 Oct. 1.4% 0.5%
Durables Ex-Trans MOM% 11/25 Oct. 1.2% 0.6%
Initial Claims ,000’s 11/25 14-Nov 505 500
Cont. Claims ,000’s 11/25 7-Nov 5611 5565
New Home Sales ,000’s 11/25 Oct. 402 405
New Home Sales MOM% 11/25 Oct. -3.6% 0.8%
U of Mich Conf. Index 11/25 Nov. F 66.0 67.0

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