- The Washington Times - Thursday, December 22, 2005

ASSOCIATED PRESS

Consumers’ spending and incomes posted solid gains in November, giving retailers hope for decent Christmas sales, while a key economic forecasting gauge flashed encouraging signals for 2006.

The Commerce Department reported yesterday that personal spending rose 0.3 percent in November and were up an even bigger 0.7 percent when inflation was removed. It was the best inflation-adjusted showing since July, when sales surged as consumers responded to auto-sales incentives.

Incomes last month increased a solid 0.3 percent, reflecting the fact that the economy created 215,000 jobs in November after two months in which thousands of jobs were lost along the hurricane-ravaged Gulf Coast.

In a further bounce back from the hurricanes, the Conference Board reported that its Index of Leading Economic Indicators rose a healthy 0.5 percent as seven of the 10 forward-pointing statistics showed strength.

The November gain followed an even bigger 1 percent rise in October as both months showed strength after a big slide in September related to the hurricanes.

Analysts said the strength shown in the various statistics supported their view that retailers should enjoy a good but not great Christmas season with sales expected to rise by around 6 percent compared to 2004.

In a sign that inflation is remaining under control, a price gauge tied to consumer purchases fell by a record 0.4 percent last month, reflecting a rollback in energy costs. Inflation outside of food and energy was up just 1.8 percent in November, compared to a year ago, the smallest year-over-year increase since March 2004.

“This is just more evidence that we have got pretty solid growth and very little inflation,” said Nariman Behravesh, chief economist at Global Insight, a Lexington, Mass., forecasting firm.

“The Fed seems to have engineered a soft landing,” Mr. Behravesh said, referring to the Fed’s goal of slowing the economy enough by raising interest rates to keep inflation under control without raising rates so high that it risks tipping the country into a recession.

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