- Associated Press - Friday, December 23, 2011

WASHINGTON (AP) — Consumers spent at a lackluster rate in November as their incomes barely grew, suggesting that Americans may struggle to keep spending more into 2012.

Consumer spending rose just 0.1 percent in November, matching the modest October increase, the Commerce Department reported Friday. Incomes also rose 0.1 percent. That was the weakest showing since a 0.1 percent decline in August.

Both the spending and income gains fell below expectations. Economists have said that solid increases in spending could boost economic growth in the final three months of what has been a disappointing year.

Paul Ashworth, chief U.S. economist at Capital Economics, called the consumer spending figure disappointing. He said it would probably mean lower economic growth than had been expected.

Rather than grow at an annual rate of up to 3 percent in the October-December quarter, the economy will likely expand at a rate of about 2.5 percent this quarter, Ashworth says. That would still be an improvement from the 1.8 percent growth in the July-September quarter.

Separately, the government said companies’ demand for long-lasting manufactured goods rose by the largest amount in four months in November, driven by a jump in orders for planes.

Orders to U.S. factories for durable goods rose 3.8 percent in November. It was the biggest gain since July. But so-called core capital goods, a proxy for business investment spending, dropped for a second straight month. They fell 1.2 percent.

The declines in business capital goods excluding aircraft raise doubts about a pocket of strength for the economy this year. Business investment spending has surged as companies stepped up orders to take advantage of tax breaks that are set to expire at year’s end.

While the economy remains vulnerable to threats, particularly a recession in Europe, the job market has improved, lifting hopes for next year.

The government said this week that applications for unemployment benefits fell by 4,000 last week to 364,000. It was the third straight weekly drop. And it pushed applications to the lowest level since April 2008, in the midst of the Great Recession.

The weakness in incomes reflected a decline in wages and salaries, the biggest component of incomes, in November.

The sluggish gain in spending was held back by a 0.3 percent fall in spending on non-durable goods such as food, clothing and gasoline. Spending on durable goods jumped 0.8 percent. It reflected the solid auto sales during the month.

Spending on services, which includes such items as medical treatments and rent, rose a modest 0.1 percent.

After-tax incomes showed no growth in November. The savings rate dipped to 3.5 percent of after-tax incomes, down from 3.6 percent in October. Both months marked the lowest savings rate since late 2007. They show that consumers are having to tap their savings to finance their spending because of the weak income growth.

The small rise in overall consumer spending was puzzling given that other reports have shown solid holiday shopping this season. Those reports had caused many economists to revise up their growth forecasts for the current quarter.

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