Buoyant US spending fuels the upturn

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US consumer spending posted its largest increase in five months in November, the latest suggestion of sustained strength in the economy as the year winds down.

The Commerce Department said yesterday consumer spending rose 0.5 per cent after advancing by a revised 0.4 per cent in October. It was the seventh straight month of increases and matched economists’ expectations.

Consumer spending, which accounts for more than two-thirds of US economic activity, was previously reported to have increased 0.3 per cent in October.

When adjusted for inflation, consumer spending increased 0.5 per cent in November after rising 0.4 per cent in October. November’s increase in so-called real consumer spending was the largest since February 2012.

This indicates that consumer spending in the fourth quarter probably accelerated from the third quarter’s 2 per cent annual rate. Spending is being bolstered by improving household balance sheets, thanks to a rising stock market and house prices.

The report added to other upbeat data, such as employment and industrial production, in suggesting that the economy retained some of its third-quarter momentum in the lead-up to the end of the year and was poised for faster growth in 2014.

It also fits in with Federal Reserve’s upbeat view on the economy, which prompted the US central bank to announce last week that it would start reducing its monthly bond purchases from January. The economy grew at a 4.1 per cent clip in the July-September period, the fastest pace in nearly two years.