(Bloomberg News) Consumer spending in the U.S. grew less than forecast in the third quarter, underscoring why Federal Reserve policy makers are zeroing in on fighting unemployment to spur the world’s largest economy.
Household purchases climbed at a 1.4 percent rate, the smallest gain in more than a year and down from a previously reported 2 percent advance, revised figures from the Commerce Department showed today in Washington. Gains in inventories and a smaller trade deficit more than offset the slowdown to propel gross domestic product to a 2.7 percent rate, exceeding the 2 percent pace previously reported.
“The economy is moving forward at a moderate pace,” said Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. “The pace of consumer spending was disappointing, but it seems less worrisome given that some other sectors of the economy are doing better, like housing.”
Fed policy makers such as William Dudley say joblessness remains too high as central bankers consider whether they need to step up record stimulus heading into the so-called fiscal cliff of tax increases and spending cuts that may take effect next year if lawmakers fail to reach a compromise. At the same time, another report today reinforced signs of a rebound in housing that is helping underpin consumer confidence.
Economists projected consumer spending, which accounts for about 70 percent of the economy, expanded at a 1.9 percent pace last quarter, according to the median forecast in a Bloomberg survey. The revised reading was lower than any of the 18 estimates, which ranged from 1.7 percent to 2.7 percent. Purchases advanced at a 1.5 percent pace in the second quarter.
GDP, the volume of all goods and services produced, was forecast to have expanded at a 2.8 percent rate, according to the median estimate of 82 economists surveyed. The economy grew 1.3 percent in the second quarter.
The Standard & Poor’s 500 Index rose, after paring an earlier rally, as investors weighed comments by lawmakers on the federal budget negotiations. The 500 Index climbed 0.4 percent to 1,415.29 at 1:04 p.m. in New York.
Elsewhere today, German unemployment increased in November for an eighth straight month as Europe’s debt crisis curbed business investment and economic growth. In Japan, retail sales fell in October by the most in 11 months as consumers purchased fewer cars and televisions.