American consumer spending surged at the fastest rate ever recorded in October, despite zero growth in incomes, the Commerce Department has revealed.
Responding to aggressive discounting by auto firms and retailers – with prices tumbling more steeply than at any time in over a decade – consumers upped their expenditure 2.9% in October, ahead of analysts’ expectations and beating the previous record of 2.6% in September 1987. The leap followed a 1.7% drop the month before.
In further upbeat news for the US economy, the National Association of Purchasing Management revealed its manufacturing index jumped in November from October’s 39.8 to 44.5.
Although the reading is still below fifty, indicating contraction, it implies that the rate of decline has slowed. Moreover, it beat economists’ expectations of 42.6, and was high enough to suggest that the economy as a whole is expanding (the threshold reading for which is 42.7).
Norbert Ore, director of the NAPM survey, was positive but cautious: “After absorbing last month’s aftershock of the terrorist attacks, the manufacturing sector showed surprising resilience in November. The trend is definitely in the right direction, but it is too soon to claim an imminent recovery.”
News sources: Wall Street Journal; Financial Times