WASHINGTON, D.C. The Commerce Department reported Wednesday that consumer spending fell by 0.6% last month, slightly less than the 0.7% drop economists had expected, but still marking the fifth straight month of decreased spending.
The five-month stretch marks the longest series of spending declines in government records that go back to 1959.
A separate report Wednesday showed that the number of newly laid off workers filing claims for unemployment benefits rose to 586,000 last week, up by 30,000 from the previous week, a much bigger increase than analysts had expected.
The personal spending reports showed that Americans’ incomes fell by a worse-than-expected 0.2% in November. It was the first decline since July and reflected, in part, the fact that more than a half-million jobs were cut in November as the recession deepened.
The 0.6% drop in consumer spending followed an even larger 1.0% fall in October. But the steep plunge in gasoline prices, which is good news for consumers, made the declines look worse. Excluding price changes, consumer spending would have dropped by 0.5% in October and actually risen by 0.6% in November.
Economists closely watch consumer spending because it accounts for two-thirds of economic growth. For the July-September quarter, the government reported Tuesday that spending had fallen by 3.8%, the biggest quarterly setback in 28 years.
Analysts say the fourth quarter could turn in an even worse performance, given that the recession has intensified. The economic problems facing households have translated into weak holiday shopping for retailers.
Michael Niemira, chief economist for the International Council of Shopping Centers (ICSC), is forecasting that sales at established stores in November and December will be down 1.5% to 2% -- making this the weakest holiday season since at least 1969.