Consumer Spending in U.S. Probably Rose as Discounts Drew Holiday Shoppers

Consumer Spending in U.S. Probably Rose as Discounts Drew Holiday Shoppers

Consumer spending probably climbed in November as Americans flocked to auto dealer showrooms and shopped for holiday bargains, giving the U.S. economy a boost heading into 2012, economists said before a report this week.

Purchases rose 0.3 percent after increasing 0.1 percent in October, according to the median estimate of 62 economists surveyed by Bloomberg News before Commerce Department figures Dec. 23. The report may also show incomes grew 0.2 percent, down from a 0.4 percent gain the prior month.

“The consumer has a little more life,” said Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “Spending is likely to continue to be in a modest grind upward. The economy is improving.”

Target Corp. (TGT) and J.C. Penney Co. (JCP) are among retailers using discounts to draw in customers hunting for affordable gifts as wages stagnate. Failure by Congress to extend tax breaks, and a slump in Europe caused by the region’s debt crisis represent risks early next year to sustaining gains in household purchases, which account for about 70 percent of the economy.

Retailers are relying on a range of marketing moves to keep consumers spending through Christmas. Cyber Monday came twice this year at J.C. Penney and Sears Holdings Corp. -- once on the day after Thanksgiving weekend and again a week later.

Target Corp. began a three-day “Almost Last Minute Sale” on Dec. 8 with markdowns on such items as Stanley Black & Decker Inc. coffee makers and gift card giveaways. A week earlier, the discount chain held the “Big Toy Event” offering half off a second item.

‘Robust’ Sales
Pier 1 Imports Inc. is among those seeing an increase in business without resorting to bigger price cuts.

“Sales are robust, merchandise margins are strong, operating margins are growing,” Alexander Smith, president and chief executive officer at Pier 1, said on a Dec. 15 conference call. Sales during the Thanksgiving weekend “increased 10 percent from last year and were achieved with modest levels of discount.”

Automakers also did well. Sales of cars and light trucks advanced 3 percent in November to a 13.6 million seasonally adjusted annualized rate, the best month since August 2009, according to researcher Autodata Corp.

The Standard & Poor’s Supercomposite Retailing Index of 93 companies has increased 2.9 percent since the end of last year compared with a 3 percent decline in the broader S&P 500.

Fed’s View
“The economy has been expanding moderately, notwithstanding some apparent slowing in global growth,” Federal Reserve policy makers said in their latest statement on Dec. 13 following a meeting. “Household spending has continued to advance, but business fixed investment appears to be increasing less rapidly and the housing sector remains depressed.”

Manufacturers are profiting from growth in U.S. exports, which reached the second-highest level on record on October, just behind the prior month’s peak.

Demand for goods meant to last at least three years rose 2 percent in November after a 0.5 percent decline the prior month, economists in the Bloomberg survey predicted. The Commerce Department will release the figures on Dec. 23.

A report from the National Association of Realtors on Dec. 21 may help clarify the degree to which the housing market has slumped over the past few years. The group will release revisions to sales data for existing homes going back to 2007.

Sales Revision
“There are downward revisions for total sales in recent years,” NAR spokesman Walter Molony said in a statement last week. The market is laboring under an overhang of distressed properties that keeps driving down prices. The drop in property values in turn has spurred demand among investors willing to pay cash for foreclosed properties, the group has said.

Sales of previously owned homes rose in November to a 5.09 million annualized rate from 4.97 million the prior month, according to the median forecast of economists surveyed. The range of estimates, from a low of 4.45 million to a high of 5.25 million, is wider than usual as some economists based their predictions on projections for the revised readings.

A day before, the Commerce Department will report that housing starts rose 1.1 percent last month to a 635,000 pace, while permits, a sign of future construction, declined.

Sales of new houses, due from the Commerce Department on Dec. 23, probably rose 2.6 percent to a 315,000 rate in November, according to economists’ estimates.

The Conference Board’s index of leading economic indicators will signal the world’s largest economy will keep expanding in the first half of 2012. The gauge rose 0.3 percent in November after a 0.9 percent gain the prior month, according to economists’ estimates.

The outlook into 2012 hinges in part on Europe, where policy makers are struggling to contain a financial crisis that began two years ago in Greece and is threatening to spread. There is also fiscal policy uncertainty in the U.S., where congressmen are debating extension of breaks on employee withholdings and measures to cut the budget deficit by $1.2 trillion over 10 years.

Bloomberg Survey

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Release Period Prior Median
Indicator Date Value Forecast
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Housing Starts ,000’s 12/20 Nov. 628 635
Housing Starts MOM% 12/20 Nov. -0.3% 1.1%
Exist Homes Mlns 12/21 Nov. 4.97 5.09
GDP Annual QOQ% 12/22 3Q T 2.0% 2.0%
Personal Consump. QOQ% 12/22 3Q T 2.3% 2.3%
Initial Claims ,000’s 12/22 17-Dec 366 378
U of Mich Conf. Index 12/22 Dec. F 67.7 68.0
LEI MOM% 12/22 Nov. 0.9% 0.3%
Pers Inc MOM% 12/23 Nov. 0.4% 0.2%
Pers Spend MOM% 12/23 Nov. 0.1% 0.3%
Durables Orders MOM% 12/23 Nov. -0.5% 2.0%
Durables Ex-Trans MOM% 12/23 Nov. 1.1% 0.4%
New Home Sales ,000’s 12/23 Nov. 307 315
New Home Sales MOM% 12/23 Nov. 1.3% 2.6%
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source: bloomberg.com