Consumer spending rebounds

Associated Press

WASHINGTON — Lured by no-interest auto deals, Americans pushed up consumer spending by the largest amount ever in October. A closely watched manufacturing gauge rebounded a bit, too, and construction spending halted a five-month slide in encouraging economic news.

While insisting it was too early to declare that the recession was ending, economists said the figures released Monday provided some hope that the groundwork is being laid for a rebound early in the new year.

"The new figures support the idea that this will be a mild recession and that we will recover from it fairly quickly," said David Wyss, chief economist at Standard &Poor’s in New York.

The Commerce Department reported that personal spending rose by a record 2.9 percent in October. The jump was led by the biggest increase in spending ever on autos and other durable goods, which reflected the huge success of zero-interest financing packages offered to lure shoppers back to showrooms after the Sept. 11 terror attacks.

Both General Motors Corp. and Ford reported Monday that continuation of the incentive programs had helped boost sales in November as well, compared to the same period a year ago.

Strong auto sales are expected to spur increased production in the new year and help to halt a yearlong slide in manufacturing. In an encouraging sign, the National Association of Purchasing Managers said Monday that its closely watched manufacturing index posted a rebound in November to 44.5, up from an 11-year low of 39.8 in October.

While the index remained at a level indicating a manufacturing recession, analysts saw the November increase as a strong gain that was led by the biggest jump in new orders on record.

In another report, construction spending halted five consecutive declines to post a 1.9 percent advance in October, the best showing since last January. The increase reflected widespread strength in home and office construction as well as a record level of spending on government projects, led by a big gain in school construction.

Despite the positive reports, Wall Street still had questions about how long it will take the economy to recover. The Dow Jones industrial average lost 87.60, or 0.9 percent, to close at 9,763.96 on Monday.

The economic reports were not all positive on Monday. Despite the big increase in personal spending, Americans’ incomes were stagnant for a second straight month as the thousands of layoffs in the airline and tourism industry following the terrorist attacks began to put a crimp on wages and salaries.

Economists say that one of the downside risks to a recovery early next year would be a sharp nosedive in spending caused by Americans fearful about job prospects.

"While the October spending binge was impressive, the lack of income growth creates concerns about future trips to the malls and dealerships," said Joel Naroff, chief economist of a Holland, Pa., forecasting firm.

Still, analysts said the aggressive credit easing by the Federal Reserve and an expected stimulus package of tax cuts and increased government spending from Congress should combine to trigger a rebound in growth next year.

"The economy is not out of the woods. However, a recovery next year remains very likely," said Melanie Jani, an economist at Salmon Smith Barney in New York.

Federal Reserve Chairman Alan Greenspan had lunch with President Bush at the White House on Monday. The Bush administration called it a routine meeting to allow Bush to hear Greenspan’s latest views on the economy.

"The president is deeply concerned about the economy. He is deeply concerned about unemployed workers and those who may lose their jobs in the future if the economy doesn’t recovery," spokesman Ari Fleischer said. The administration is pressuring Congress to enact a stalled economic stimulus bill.

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Talk to us

More in Herald Business Journal

FILE - In this file photo dated Monday, March 11, 2019, rescuers work at the scene of an Ethiopian Airlines plane crash south of Addis Ababa, Ethiopia.  The number of deaths in major air crashes around the globe fell by more than half in 2019 according to a report released Wednesday Jan. 1, 2020, by the aviation consultancy To70, revealing the worst crash for the year was an Ethiopian Airlines Boeing 737 MAX on March 10 that lost 157 lives. (AP Photo/Mulugeta Ayene, FILE)
US board says Boeing Max likely hit a bird before 2019 crash

U.S. accident investigators disagree with Ethiopian authorities over the cause of a 2019 Boeing 737 Max crash.

Paddywack co-owner Shane Somerville with the 24-hour pet food pantry built by a local Girl Scout troop outside of her store on Tuesday, Dec. 20, 2022 in Mill Creek, Washington. (Olivia Vanni / The Herald)
An out-paw-ring of support: Mill Creek pantry feeds pets, day or night

With help from local Girl Scouts, the Mill Creek pet food store Paddywack is meeting the need for pet supplies in a pinch.

Kelly Cameron is the woodworker behind Clinton-based business Turnco Wood Goods. (David Welton)
Whidbey woodworkers turn local lumber into art

In the “Slab Room” at Madrona Supply Co., customers can find hunks of wood native to the south end of Whidbey Island.

Siblings Barbara Reed and Eric Minnig, who, co-own their parent’s old business Ken’s Camera along with their brother Bryan, stand outside the Evergreen Way location Thursday, Dec. 15, 2022, in Everett, Washington. After five decades in business, Ken’s will be closing its last two locations for good at the end of the year. (Ryan Berry / The Herald)
Print it or lose it: Ken’s Camera closes after decades caught on film

The local legend, processing film photos since 1971, will close its locations in Mount Vernon and Everett at the end of 2022.

Barb Lamoureux, 78, poses for a photo at her office at 1904 Wetmore Ave in Everett, Washington on Monday, Jan. 23, 2023. Lamoureux, who founded Lamoureux Real Estate in 2004, is retiring after 33 years. (Annie Barker / The Herald)
Barb Lamoureux, ‘North Everett’s Real Estate Agent’ retires

A longtime supporter of Housing Hope, Lamoureux helped launch the Windermere Foundation Golf Tournament.

IonQ will open a new quantum computing manufacturing and research center at 3755 Monte Villa Parkway in Bothell. (Photo courtesy of IonQ)
Quantum computing firm IonQ to open Bothell R&D center

IonQ says quantum computing systems are key to addressing climate change, energy and transportation.

AGC Biologics in Bothell to produce new diabetes treatment

The contract drug manufacturer paired with drug developer Provention Bio to bring the new therapy to market.

Nathanael Engen, founder of Black Forest Mushrooms, sits in the lobby of Think Tank Cowork with his 9-year-old dog, Bruce Wayne, on Friday, Jan. 27, 2023, in downtown Everett, Washington. (Ryan Berry / The Herald)
Growing green mushrooms in downtown Everett

The founder of Black Forest Mushrooms plans to grow gourmet mushrooms locally, reducing their carbon footprint.

FILE - In this Monday, March 23, 2020, file photo, a worker walks near a mural of a Boeing 777 airplane at the company's manufacturing facility in Everett, Wash., north of Seattle. Beginning in 2024, some 737 planes will be built in Everett, the company announced to workers on Monday. (AP Photo/Ted S. Warren, File)
With 747 out, Boeing to open new 737 Max line at Everett’s Paine Field

Since the last 747 rolled out of the factory, speculation has been rife that Boeing might move some 737 Max production to Everett.

Most Read