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Consumer Spending in U.S. Declines as Sandy Reduces Wages

Bloomberg - Nov 30, 2012

Americans unexpectedly pared spending in October as superstorm Sandy depressed wages, showing the world’s largest economy is cooling as lawmakers seek ways to avoid the so-called fiscal cliff.

The 0.2 percent decrease in purchases followed a 0.8 percent gain, Commerce Department figures showed in Washington. Adjusted for inflation, the decline was 0.3 percent, the biggest in more than three years. Incomes were little changed last month as the biggest Atlantic storm to ever hit the U.S. shaved $18.2 billion in wages at an annual rate.

“The outlook for consumer spending is tenuous,” said Jacob Oubina, a senior economist at RBC Capital Markets LLC in New York. “We’re already on soft footing and you’re now in an environment where the risks to confidence are increasing because of the fiscal cliff.”

The possibility that lawmakers will not find common ground to prevent about $607 billion in tax increases and government spending cuts from taking effect next year raises the risk that gains in consumer confidence will be reversed as the December deadline nears. Combined with revisions yesterday showing household spending decelerated last quarter, today’s data help explain why the Federal Reserve has geared its policy toward stoking job growth.

Read Full Article from Bloomberg

- Posted: 2012-11-30 15:27:32

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