Spending, Home Sales Probably Climbed: U.S. Economy Preview
Dec. 20 (Bloomberg) -- American consumers probably earned and spent more in November, giving retailers and real-estate agents reason to anticipate business will improve in 2010, economists said before reports this week.
Household purchases rose 0.7 percent for a second month and incomes climbed 0.5 percent, the most since May, according to the median estimate of 60 economists surveyed by Bloomberg News before a Commerce Department report Dec. 23. Combined sales of new and existing homes last month may have reached the highest level since May 2007, other figures may show.
Government efforts to push down interest rates and spur lending, combined with discounts by merchants such as Best Buy Co., may encourage consumers to keep buying in coming months. A jobless rate forecast to average 10 percent next year and mounting foreclosures will serve as reminders that the world’s largest economy is not free from all threats to the recovery.
“We’re still looking at consumer spending expanding, but obviously with a lot of constraints because of the weak job market and tight credit,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “You’re not going to see a full recovery in the housing sector until the job market recovers.”
An increase in consumer spending for goods and services during November would be the sixth in the past seven months. Sales at U.S. retailers last month increased 1.3 percent after a 1.1 percent gain in October, the Commerce Department reported on Dec. 11.
More Discounting
Companies are luring shoppers by offering lower prices during the holiday season. Best Buy, the largest electronics retailer, was offering flat-screen TVs for $299.99 alongside discounted laptops. As a result, the Richfield, Minnesota-based company will see its gross margin decline by as much as 1 percentage point in the fourth quarter, Chief Executive Officer Brian Dunn said on a Dec. 15 conference call with analysts.
Americans are also buying more cars. Sales of cars and light trucks rose to a 10.9 million unit annual pace in November, up 4.5 percent from the previous month, according to industry data. The rate was the highest since 14.1 million in August, when the government’s “cash-for-clunkers” plan expired near the end of that month.
Auto sales probably contributed to a gain in orders at factories. Orders for durable goods, those meant to last at least three years, rose 0.5 percent in November after a 0.6 percent drop, according to the median estimate ahead of a Dec. 24 report from the Commerce Department.
Excluding demand for transportation equipment, which tends to be volatile, orders probably increased 1 percent, the survey median showed.
Consumer Confidence
A slowdown in the pace of job cuts and higher stock prices are boosting consumer sentiment. The Reuters/University of Michigan’s final gauge of December consumer confidence on Dec. 23 is projected to climb to 73.7, its highest level in almost two years, from 67.4 in November.
Payrolls fell by 11,000 last month, the fewest job cuts since the recession began in December 2007, Labor Department figures showed Dec. 4. The unemployment rate in November fell to 10 percent from a 26-year high of 10.2 percent.
The Standard & Poor’s 500 Index has risen 63 percent from a 12-year low in March, closing at a 14-month high on Dec. 14.
Lower interest rates, cheaper homes and a homebuyer tax credit are bolstering a housing market that contributed to the worst economic slump since the 1930s.
Home Sales
The National Association of Realtors is expected to report Dec. 22 that purchases of existing homes rose 2.5 percent in November to an annual pace of 6.25 million, the highest level since February 2007, according to the survey median.
The Commerce Department on Dec. 23 may report sales of new homes rose 1.9 percent to a 438,000 annual pace last month, the fastest since August 2008, according to the Bloomberg survey median.
Gains in the housing market may prove uneven as foreclosures mount. Some 306,627 properties received a default or auction notice or were seized by banks last month and a similar number is expected for December, according to Irvine, California-based RealtyTrac Inc.
The government’s final figure for third-quarter gross domestic product may show the economy expanded at a 2.8 percent annual rate, matching last month’s estimate, according to the survey median. The Commerce Department will report the data on Dec. 22.
Bloomberg Survey
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Release Period Prior Median
Indicator Date Value Forecast
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GDP Annual QOQ% 12/22 3Q F 2.8% 2.8%
Personal Consump. QOQ% 12/22 3Q F 2.9% 2.9%
GDP Prices QOQ% 12/22 3Q F 0.5% 0.5%
Core PCE Prices QOQ% 12/22 3Q F 1.3% 1.3%
Exist Homes Mlns 12/22 Nov. 6.10 6.25
Exist Homes MOM% 12/22 Nov. 10.1% 2.5%
FHFA HPI MOM% 12/22 Oct. 0.0% 0.2%
Richmond Fed Index 12/22 Dec. 1 4
ABC Conf Index 12/22 Dec. 21 -45 -44
MBA Mortgage Applications12/23 Dec. 19 0.3% n/a
Pers Inc MOM% 12/23 Nov. 0.2% 0.5%
Pers Spend MOM% 12/23 Nov. 0.7% 0.7%
PCE Deflator YOY% 12/23 Nov. 0.2% 1.6%
Core PCE Prices MOM% 12/23 Nov. 0.2% 0.1%
Core PCE Prices YOY% 12/23 Nov. 1.4% 1.5%
U of Mich Conf. Index 12/23 Dec. F 73.4 73.7
New Home Sales ,000’s 12/23 Nov. 430 438
New Home Sales MOM% 12/23 Nov. 6.2% 1.9%
Initial Claims ,000’s 12/24 19-Dec 480 470
Cont. Claims ,000’s 12/24 12-Dec 5186 5175
Durables Orders MOM% 12/24 Nov. -0.6% 0.5%
Durables Ex-Trans MOM% 12/24 Nov. -1.3% 1.0%
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