Spending May Rise, Home Construction Fall: U.S. Economy Preview Dec. 16
(Bloomberg) -- Personal spending in the U.S. probably rose in November by the
most in 10 months, fueled by income gains that will help the economy weather a
deepening slump in homebuilding, economists said reports this week may show.
A 0.7 percent rise in purchases would follow a 0.2 percent October increase,
according to the median estimate of economists surveyed by Bloomberg News ahead
of the Commerce Department's Dec. 21 report. A separate Commerce report may
show builders broke ground last month on the fewest houses in 14 years.
More jobs and growing wages will support consumer spending, which accounts
for more than two-thirds of the economy, even as lower home values and credit
restrictions push the housing recession into its third year. The figures bear
out the Federal Reserve's forecast of ``moderate'' growth in coming months.
``The consumer is holding in there,'' said Conrad DeQuadros, a senior
economist at Bear Stearns & Co. in New York. ``It looks like we are still
seeing moderate growth despite the drag from the recession in housing.''
Incomes rose 0.5 percent in November, the most in four months, after a 0.2
percent gain, according to the median estimate in the Bloomberg survey.
The increase in wages reflects a job market that remains one of the few
bright spots in the economy, economists said. Payrolls rose by 94,000 in
November after increasing 170,000 in October, the Labor Department said Dec. 7.
The jobless rate held at 4.7 percent for the third month.
Prices Increase
The income report may also show a price gauge tied to spending patterns and
excluding food and energy costs, the Fed's preferred measure, rose 0.2 percent
for a third month, economists forecast. The index probably gained 2 percent
from November 2006, after a 1.9 percent year-over-year increase the prior
month.
The figures would follow a report last week of a bigger- than-forecast
increase in consumer prices, which reinforced concern that inflation remains a
risk. That gives the Fed less leeway to keep trimming interest rates as the
housing and credit markets deteriorate, economists said.
Housing starts, due from the Commerce Department on Dec. 18 dropped 4.3
percent to an annual rate of 1.176 million, according to the Bloomberg survey
median. The pace was 1.229 million in October. Permits, a gauge of future
construction, probably fell to a 1.15 million rate, the lowest since June 1993.
Builders Pessimistic
Declines in residential construction, which have subtracted from economic
growth since the first quarter of 2006, will extend well into 2008, economists
said. Homebuilder confidence in December held at a record low for a third
month, a report tomorrow from the National Association of Home Builders/Wells
Fargo is projected to show.
It's ``hard to tell'' if the worst is over, Ara Hovnanian, chief executive
officer of Hovnanian Enterprises Inc., the largest homebuilder in New Jersey,
said in an interview Dec. 12. He said he was disappointed the Fed cut the
benchmark target rate by only a quarter point to 4.25 percent a day earlier.
``I would have hoped for a little bolder move.''
Gains in exports and inventories propelled third-quarter growth to an annual
rate of 4.9 percent, the strongest in four years, revised figures from the
Commerce Department on Dec. 20 may show. The final estimate would be little
changed from last month's preliminary data.
Growth will cool this quarter and early next year, economists said. A closely
watched gauge of the economy's future dropped in November for a third time in
four months, the Conference Board may report on Dec. 20. The index of leading
economic indicators fell 0.3 percent, according to the Bloomberg survey median,
as stocks decreased, building permits slumped, firings rose and consumers
turned more pessimistic.
Moods didn't improve this month, a private report may show on Dec. 21. The
Reuters/University of Michigan final index of consumer sentiment dropped at a
two-year low in December, economists forecast.
Bloomberg Survey Release
Period Median Prior Indicator Date
Forecast Value Current Account $Blns 12/17 3Q -183.3 -190.8
Empire Manu. Index 12/17 Dec. 20.0 27.4 Net Long Term
TICS $Blns 12/17 Oct. 48.5 26.4 NAHB Housing Index 12/17
Dec. 19 19 Housing Starts 12/18 Nov.
1176K 1229K Building Permits 12/18 Nov. 1150K 1170K
GDP Annual QOQ% 12/20 3Q F 4.9% 4.9% GDP Prices QOQ%
12/20 3Q F 0.9% 0.9% Initial Claims 12/20
Dec. 16 335K 333K LEI MOM% 12/20 Nov.
-0.3% -0.5% Philly Fed Index 12/20 Dec. 6.0 8.2
Personal Inc MOM% 12/21 Nov. 0.5% 0.2% Personal Spend
MOM% 12/21 Nov. 0.7% 0.2%
Core PCE Prices MOM% 12/21 Nov. 0.2% 0.2% Core PCE Prices
YOY% 12/21 Nov. 2.0% 1.9% U of Mich Conf. Index 12/21
Jan. F 74.9 76.1
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