WASHINGTON – Americans increased their spending in November by the most in five months, and their income edged up modestly.
Consumer spending rose 0.5 percent from October, when spending had risen 0.4 percent, the Commerce Department said Monday. It was the best showing since June. The gain was driven by a jump in spending on long-lasting durable goods such as autos.
Consumers’ income rose 0.2 percent, an improvement from a 0.1 percent decline in October. Wages and salaries, the most important component of income, rose a solid 0.4 percent. That gain reflected strength in the private sector and a modest gain in government pay.
Consumer spending is closely followed because it accounts for about 70 percent of economic activity. The strong November showing suggests solid economic growth this quarter.
Steady hiring and modest wage gains have boosted consumer confidence and given Americans more money to spend. At the same time, higher stock and home prices have driven up household wealth and made some people more comfortable about spending.
The big rise in spending and smaller income gain meant that the personal saving rate slipped a bit to 4.2 percent of after-tax income in November. That was down from 4.5 percent in October.
An inflation gauge tied to consumer spending that is closely followed by the Federal Reserve showed that inflation is still running well below the Fed’s target. Prices were unchanged in November and have risen just 0.9 percent over the past 12 months. The Fed’s target for annual inflation is 2 percent.
The economy, as measured by the gross domestic product, grew at an annual rate of 4.1 percent in the July-September quarter, the government said Friday in its third and final estimate.
The figure was up from its previous estimate of a 3.6 percent annual growth rate for the third quarter. Nearly all of the upward revision reflected faster spending for consumers, a possible sign of momentum entering the final three months of the year.