CONSUMER SPENDING RESURGES : RISE IN OCTOBER BOOSTS HOPES FOR HOLIDAY SHOPPING SEASON.Byline: Martin Crutsinger Associated Press Associated Press: see news agency. Associated Press (AP) Cooperative news agency, the oldest and largest in the U.S. and long the largest in the world. Consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. rebounded by a bigger than expected 0.5 percent in October, a hopeful sign that Americans are ready to spend during the Christmas season after a summer lull. The Commerce Department said Friday that the rise in personal consumption spending - which accounts for two-thirds of total economic activity - was led by a big jump in demand for personal services personal services n. in contract law, the talents of a person which are unusual, special or unique and cannot be performed exactly the same by another. These can include the talents of an artist, an actor, a writer, or professional services. such as transportation, housing and recreation. The big rise in spending was not accompanied by a similar increase in incomes, which were unchanged during the month. Still, analysts said this was not unexpected given that wages and other forms of incomes had posted strong gains of 0.6 percent in August and September. Given the strong labor market labor market A place where labor is exchanged for wages; an LM is defined by geography, education and technical expertise, occupation, licensure or certification requirements, and job experience , with unemployment near a seven-year low, and consumer confidence at the highest levels in nearly a decade, analysts believe all signs are pointing to a good Christmas sales season. ``When consumers are happy they tend to spend money,'' said Paul Getman, senior economist at Regional Financial Associates in West Chester West Chester, borough (1990 pop. 18,041), seat of Chester co., SE Pa., W of Philadelphia; inc. 1799. Primarily residential, West Chester was long the trade and processing center for an agricultural region that is now mainly suburbs. , Pa. ``Everything seems to be in place for a good holiday season.'' The nation's retailers, who suffered a dismal Christmas last year, hope that forecast proves accurate, given that they ring up half their sales during this time of year. Overall economic growth, as measured by the gross domestic product, was cut by more than half during the summer to a moderate 2 percent pace because of a sharp slowdown in consumer spending, which turned in its poorest performance in five years. But analysts said the October rise in spending provided evidence that the consumer simply was taking a breather and was prepared to resume purchasing. Cheryl Katz, a senior economist at Merrill Lynch in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , said the economy is not poised for runaway growth, given that many consumers still were carrying high levels of personal debt. She predicted that the GDP GDP (guanosine diphosphate): see guanine. would expand by about 2 percent for all of 1997. ``Slower income growth, along with heavy debt burdens, will result in moderate growth,'' she said. ``The economy is slowing but not stopping.'' Many economists had anticipated an October increase in consumer spending of about 0.3 percent. Consumer spending had eked out a 0.1 percent in September. The rise in consumer spending totaled $27.5 billion, at an annual rate, in October with three-fourths of that strength coming in purchases of services, which rose by 0.7 percent. Purchases of durable goods durable goods Goods, such as appliances and automobiles, that have a useful life over a number of periods. Firms that produce durable goods are often subject to wide fluctuations in sales and profits. Also called consumer durables. , everything from cars to appliances, were up 0.4 percent while purchases of nondurable non·du·ra·ble adj. Not enduring; being in a state of constant consumption: nondurable items such as paper products. n. A consumable item: nondurables such as food. items rose by 0.3 percent. The Dow Jones industrial average Dow Jones Industrial Average The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. rose 22.36 Friday to close at 6,521.70. For all of November, the Dow gained 492.32, or nearly 8.2 percent, as investors became satisfied that the economy was slowing enough to convince the Federal Reserve that higher interest rates are not needed to fight inflation. The unchanged performance for personal incomes in October was the weakest showing since it also showed no gain in July. Private wages and salaries actually decreased at an annual rate of $8.9 billion in October, following a gain of $28.2 billion in September. The October drop reflected a decline in average weekly hours, which more than offset an increase of employment. Disposable incomes, the money left over after taxes, was also unchanged in October after a 0.6 percent September increase. Real disposable incomes, which adjusted for inflation, fell by 0.3 percent in October. CAPTION(S): Chart Chart: Associated Press Poll Economic confidence up from five years ago Associated Press |
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