The number of Americans filing new unemployment claims rose last week and consumer spending barely increased in October, according to data on Wednesday which could prompt economists to tamp down on expectations for solid growth in the current quarter. Other reports showed new orders for a range of long-lasting manufactured goods rose, but details of the report were generally weak, with spending plans by businesses the weakest since January. “We are getting a disappointing start to the fourth quarter. It doesn’t have the strong upward thrust we normally see in a regular recovery,” said Pierre Ellis, senior global economist at Decision Economics in New York.
Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 393,000 last week, the Labor Department said. Economists had forecast claims rising to 390,000. Separately, the Commerce Department said consumer spending edged up 0.1 per cent, slowing sharply from a revised 0.7 per cent increase in September as households took advantage of the largest increase in income in seven months to rebuild their savings. Economists had expected spending, which accounts for about 70 per cent of U.S. economic activity, to rise 0.4 per cent.
When adjusted for inflation, spending nudged up 0.1 per cent last month, pointing to a loss of momentum after a relatively strong third quarter, when it grew at an annual rate of 2.3 per cent. Income rose 0.4 per cent last month, the largest gain since March. That was a touch above economists’ expectations for a 0.3 per cent increase and followed a 0.1 per cent gain in September. Taking inflation into account, disposable income rose 0.3 per cent, the largest increase since October 2010. It had declined 0.1 per cent in September.
MORE SAVING
With incomes failing to keep up with inflation amid a 9 per cent unemployment rate, households had been saving less in recent months to fund spending. The saving rate increased to 3.5 per cent last month from 3.3 per cent in September. Savings rose to annual rate of $400.2 billion from $376.9 billion in September. Economists had forecast this category unchanged from the previously reported 1.8 per cent rise.
But weak demand for transportation equipment saw overall orders falling 0.7 per cent after declining 1.5 per cent in September. Economists had forecast overall orders dropping 1.0 per cent last month. Overall orders were dragged down by a 4.8 per cent drop in bookings for transportation equipment as orders for civilian aircraft dropped 16.4 per cent last month. Boeing received only 7 orders for aircraft, according to the plane maker’s website, down from 59 in September. That overshadowed a 6.2 per cent increase in orders for motor vehicles. Despite the rise in orders excluding transportation, the tenor of the report was weakened by a drop in non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending. The category fell 1.8 per cent last month after a downwardly revised 0.9 per cent rise in September.
