Consumer spending exceeds income in November 2007

Posted Dec 21st 2007 12:22PM by Joseph Lazzaro
Filed under: Economic Data, Federal Reserve

Consumers spent more than they earned in November 2007, returning to near-decade long characteristic that has been responsible for driving a considerable portion of U.S. economic growth, the U.S Commerce Department reported Friday. Meanwhile, nominal income rose just 0.4% in November 2007, below the 0.5% estimate, the department announced. Nominal income gained 0.2% in October 2007.

Consumer spending rose 1.1% in November 2007, above the 0.9% estimate. Spending on durable goods -- such as autos, furniture and appliances -- increased 0.6%, after a 0.1% decline in October 2007. Non-durable goods spending also rose 0.6%, and services spending gained 0.5%.

The higher spending reduced the nation's personal savings rate, which declined to -$48.4 billion, or -0.5% of disposable income. Also, core inflation increased 0.2% in November, below the 0.3% estimate, but the 12-month gain of 2.2% remains above the U.S. Federal Reserve's stated target zone of 1-2%.

Spotlight on savings

"The negative savings rate, or no savings by the nation, is the most concerning statistic," economist Steve Affinito told BloggingStocks Friday. "While the economy is getting a boost from consumer spending, spending that outstrips income is not sustainable, long-term. I know it's not the cheeriest message during the holidays, but Americans need to save more over the long haul."

The 0.6% rise increase in durable goods spending took many economists and analysts by a surprise, as the housing sector's slump was expected to create a slump in those long-lasting items, such as appliances - - that go in homes. So far, that pronounced downward trend has not occurred.

Tags: consumer spending, core inflation, CPI, durable goods, income, inflation, inthenews, savings rate, U.S. Commerce Department, U.S. Federal Reserve