WASHINGTON – A series of gloomy economic reports Wednesday showed consumers holding tight to their wallets with job losses expected to mount in the months ahead.
There was one glimmer of good news, however. Lower gas prices and widespread holiday discounts are giving consumers greater buying power. Consumer spending, when adjusted for those price drops, rose last month after five months of declines, the Commerce Department said Wednesday.
But as companies in a wide range of sectors lay off workers, economists don’t expect consumers to ramp up spending anytime soon.
November’s inflation-adjusted increase in spending is “a temporary, one-month aberration in the downward trend of consumption,” said Brian Fabbri, chief economist at BNP Paribas.
Brian Bethune, an economist at IHS Global Insight, predicted that consumer spending would fall at an annual rate of 2.5 percent to 3 percent in the current quarter, after a 3.8 percent drop in the third quarter, the worst in 28 years.
Without adjusting for inflation, the Commerce Department said consumer spending fell by 0.6 percent in November, the fifth straight month of decline.
Separately, the Labor Department said the number of Americans who filed initial claims for unemployment benefits rose to the highest level in 26 years, though the labor force has grown by about half since then.
New claims for jobless benefits jumped to a seasonally adjusted 586,000 in the week ending Dec. 20, from an upwardly revised figure of 556,000 the previous week.
On Tuesday, the government reported that the overall economy, as measured by GDP, declined at an annual rate of 0.5 percent in the July-September quarter although analysts think the contraction will accelerate dramatically in the current quarter. Some economists are forecasting that GDP will plunge at an annual rate of 6 percent for the October-December period. That would be the worst quarterly showing since 1982, though others estimate the decline for the fourth quarter at about 4.5 percent.
In another report released Wednesday, the Commerce Department said orders for large manufactured goods dropped by 1 percent, less than the 3 percent economists had expected. But that followed a large drop in October that was revised upward Wednesday to 8.4 percent.
The November decline was led by a huge drop in orders for aircraft and a smaller drop in autos. Excluding the big decline in transportation, total orders rose 1.2 percent in November, the best showing since June. And orders for nondefense, nonircraft capital goods – a measurement that economists consider a proxy for business investment – rose 4.7 percent.
But durable goods orders are considered volatile and can be heavily revised, economists said.
“It takes more than one (month) to turn that report around,” said Peter Kretzmer, senior economist at Bank of America.