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

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Lead climbers head up their respective routes at Vertical World North on Monday, Nov. 20, 2023, in Lynnwood, Washington. (Ryan Berry / The Herald)
Beginner’s ascent: A newcomer’s guide to indoor climbing

Indoor climbing gyms in and around Snohomish County offer thrills without winter chills.

Alexis Burroughs holds a bigleaf maple leaf while guiding her participants through sensory observation during a forest bathing session Sunday, Nov. 19, 2023, at Lord Hill Regional Park near Snohomish, Washington. (Ryan Berry / The Herald)
To restore human bond with nature, locals lead forest bathing sessions

A yoga instructor in Bothell and Adopt a Stream in Everett say the meditative practice evokes emotion, health benefits.

Instructor Gael Gebow checks her stopwatch while tracking her group’s exercises during her Boot Camp fitness class Monday, Nov. 13, 2023, at the YMCA in Everett, Washington. (Ryan Berry / The Herald)
YMCA fitness instructor challenges, empowers Everett residents

Gael Gebow has made inclusivity and healthy living her focus in 23 years at the YMCA.

A view of the Broadway construction site of Compass Health’s new mental health facility on Wednesday, Nov. 29, 2023 in Everett, Washington. (Olivia Vanni / The Herald)
Compass Health dedicates Everett block to housing and behavioral health services

The “state-of-the-art” project is set to total over $90M. The nonprofit has asked for public support.

More than 150 people attend a ribbon cutting event on Nov. 16, 2023 celebrating the completion of Innovation Hall at the University of Washington Bothell and Cascadia College campus. The building, which highlights STEM instruction and research, opens to students in January. Credit: Tara Brown Photography/UW Bothell
New science, math facility opens in January at UW Bothell

Innovation Hall is the first new building to be constructed at the Bothell university campus in 10 years.

Rairdon Auto Group acquires Pignataro VW in Everett

Everett VW dealership is the 12th for the Rairdon Group, which marks 30 years in business this year.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds. owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Melrose and Vine Collective owner Kara Langus in her vintage collection room at her store on Friday, Jan. 5, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
New and vintage women’s boutique aims to dazzle in downtown Everett

Add some sparkle to your wardrobe: Melrose and Vine Collective opened inside a former bank building on Pacific Avenue.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.