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Americans look past fiscal debate as spending climbs

WASHINGTON — Americans looked past the debate on fiscal policy in November as consumer spending climbed. Household purchases rose 0.4 percent last month after a 0.1 percent drop in October that was smaller than first estimated, Commerce Department figures showed Friday in Washington.

Gains in employment and housing encouraged consumers to buy gifts for the holidays last month and replace autos damaged by Hurricane Sandy.

"The numbers are encouraging," said Brian Jones, a senior U.S. economist at Societe Generale in New York, who correctly forecast the increase in spending. "There's business that has to get done whether or not these guys iron out this thing in Washington in a timely fashion."

The report also showed incomes climbed 0.6 percent in November, the most since February, after a 0.1 percent increase the prior month. Hurricane Sandy cut pay by about $18.2 billion at an annual rate in October, the Commerce Department said.

Wages and salaries also advanced 0.6 percent in November after falling 0.3 percent a month earlier. Because the increase in pay surpassed the gain in spending, the saving rate climbed to 3.6 percent in November from 3.4 percent in October.

Industry figures show car and light truck sales rebounded in November as buyers returned to showrooms following the storm. Light vehicles sold at 15.5 million annual rate last month, the most since 2008, according to data from Ward's Automotive Group.

The holiday shopping season also started off strong, with consumers spending 13 percent more during the four-day U.S. Thanksgiving weekend than in the same period in 2011. Purchases rose to $59.1 billion from Nov. 22 through Nov. 25 from $52.4 billion last year, according to the National Retail Federation.

The strength of consumer spending early next year will depend on whether job creation will feed into income growth and whether Congress allows taxes to rise in January, thereby eating into Americans' paychecks. A healing housing market will also help stir spending by boosting household wealth, and falling gasoline prices could shore up buying power.

"Consumers will need to prioritize how and where they are spending," said Robert Hull, chief financial officer of home- improvement retailer Lowe's. "The lead-up to the fiscal cliff and its outcome has the potential to negatively impact both consumer and business spending."

.Fast facts

Other reports

• Confidence among U.S. consumers has sunk to its lowest point since July, according to a monthly index. The University of Michigan says its consumer sentiment index for December fell to 72.9, a sharp drop from the November reading of 82.7, which was a five-year high. Peter Newland, an economist at Barclays, says consumer confidence has dropped because of uncertainty over whether Congress and the Obama administration will reach a budget deal to avert sharp tax increases and government spending cuts set to take effect in January.

• Demand for goods such as machinery and electronics climbed more than forecast in November, showing that companies are planning to expand next year as they look beyond the tax increases and spending cuts slated to take effect. Orders for durable goods increased 0.7 percent last month after a 1.1 percent gain in October that was larger than previously estimated, the Commerce Department reported Friday.

Americans look past fiscal debate as spending climbs 12/21/12 [Last modified: Friday, December 21, 2012 9:53pm]
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