Ahead of the Bell: US consumer spending

US consumer spending expected to show solid rebound in November

Associated Press
Weak consumer, business demand may slow US growth
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In this Oct. 28, 2014 photo, customers shop at a Century 21 Department Store in Philadelphia. The Commerce Department releases personal income and spending for October on Wednesday, Nov. 26, 2014. (AP Photo/Matt Rourke)

WASHINGTON (AP) -- The Commerce Department reports on consumer spending and income in November. The report will be issued Tuesday at 8:30 a.m. Eastern.

SPENDING UP: The expectation is that spending rose 0.5 percent in November and income growth also was 0.5 percent, according to a survey of economists by data firm FactSet.

STRONGER GAINS: Increases at that level would represent an acceleration from October, when consumer spending edged up a slight 0.2 percent and income also grew by just 0.2 percent.

Economists are forecasting a significant pickup in November based on an earlier government report that retail sales jumped 0.7 percent during the month, the best showing in eight months. In addition, income is expected to show a solid gain given that the economy created 321,000 jobs last month, the best performance in three years.

Economists watch consumer spending closely because it accounts for 70 percent of economic activity.

The report on retail sales showed that cheaper gas and an improving job market put consumers in a buying mood in November.

The National Retail Federation is forecasting that holiday sales will rise by 4.1 percent this year compared with 2013. That would be the biggest gain in three years.

Inflation is expected to remain a no-show, when measured by an inflation gauge tied to consumer spending that is closely watched by the Federal Reserve.

The Fed concluded its final meeting of the year last week with a pledge to remain "patient" in deciding when to begin raising interest rates. With inflation continuing to fall below the Fed's target of 2 percent, many economists believe the central bank will be in no hurry to start raising interest rates even though unemployment, currently at 5.8 percent, is approaching the Fed's goal of 5.2 to 5.5 percent.

Many economists believe that consumer spending will keep advancing in 2015 and support economic growth of 3 percent or better, making 2015 the best year for growth in a decade.

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