Spending by U.S. consumers climbed in November as Americans pushed aside the threat of higher taxes next year, buying gifts for the holidays and making up for shopping lost to superstorm Sandy.
Purchases increased 0.4 percent last month after a 0.1 percent drop in October that was smaller than previously estimated, Commerce Department figures showed today in Washington. The gain matched the median forecast of 80 economists surveyed by Bloomberg. Incomes rebounded after being depressed in October by lost wages due to Sandy.
A better showing by consumers, whose spending makes up 70 percent of the economy, will help sustain the expansion as businesses rein in investment and global buyers temper demand. At the same time, households are set to be challenged by more than $600 billion in tax increases and federal spending cuts due to be put in place for January without action from Congress.
“The numbers looks quite good,” said Thomas Julien, an economist at Natixis North America in New York, who correctly forecast the pick-up in purchases. “We have clearly had a rebound in consumer spending.”
Economists’ spending projections ranged from gains of 0.2 percent to 0.7 percent. The Commerce Department initially reported that October spending dropped 0.2 percent.
Another report today showed demand for goods such as machinery and electronics climbed in November for a second month, showing companies are planning to expand next year as they look beyond the tax increases and spending cuts slated to take effect.
Bookings for non-defense capital goods excluding aircraft, a proxy for future business investment, rose 2.7 percent last month, the Commerce Department reported today in Washington. Orders for all durable goods climbed 0.7 percent, exceeding the median forecast of economists surveyed by Bloomberg that projected a 0.3 percent advance.
Stock-index futures held earlier losses after the reports after House Republican leaders canceled a planned vote on higher taxes for top earners, sending budget talks deeper into turmoil. The contract on the Standard & Poor’s 500 Index maturing in March fell 1.5 percent to 1,419.5 at 8:46 a.m. in New York.
Incomes climbed 0.6 percent in November, the most since February, after a 0.1 percent increase the prior month, today’s spending figures also showed. Superstorm Sandy cut pay by about $182 billion at an annual rate in October, the Commerce Department said. Economists projected incomes would increase 0.3 percent, according to the median estimate.