US consumer spending rose more than expected in October, while new applications for jobless aid last week fell to their lowest level in more than a year, suggesting the economic recovery is gaining traction.
An unexpected decline in orders for long-lasting US manufactured goods tempered some of the optimism and was a reminder that recovery from the worst recession in 70 years would be gradual.
The Commerce Department said today consumer spending increased 0.7 per cent last month after falling 0.6 per cent in September. That was above market expectations for a gain of 0.5 per cent.
A separate report from the Labor Department showed initial claims for state unemployment benefits slid to 466,000 last week from 501,000 the prior week in the fourth straight week of declines. The figure was well below market expectations for 500,000.
US stock index futures added to gains on the jobless claims data, which was viewed as a sign that the battered labour market was gradually healing. Prices of US government bond extended losses.
There are fears that consumer spending, which normally accounts for over two-thirds of US economic activity, may slow in the fourth quarter because of high unemployment and hold back economic growth.
The jobless claims are still above the 400,000 level that analysts say would signal growth in payrolls.
The four-week moving average for new jobless claims, which is considered a better gauge of underlying trends because it smooths out weekly swings, fell 16,500 to 496,500 in the latest week. It was the lowest level since November 2008 and the 12th straight weekly decline.
A government report yesterday showed spending increased at a 2.9 per cent annual rate in the July-September period, slower than the previously estimated 3.4 per cent pace.
That resulted in the government paring back its third-quarter gross domestic product growth estimate to a 2.8 per cent pace from 3.5 per cent.
The Commerce report also showed personal income increased 0.2 per cent in October after a similar advance the previous month. That was above market expectations for a 0.1 per cent gain.
Savings fell to an annual rate of $490.3 billion, pushing down the saving rate to 4.4 per cent from 4.6 per cent in September.
In another report, the Commerce Department said orders for durable goods, which include products such as refrigerators and computers, dropped 0.6 per cent after rising 2.0 per cent in September.
Durable goods orders are considered a leading indicator of manufacturing activity.
New durable goods orders excluding transportation declined 1.3 per cent last month after rising 1.8 per cent in September.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 2.9 per cent last month after rising by a hefty 2.6 per cent in September.
Reuters