US consumers cut spending during October at the steepest rate in more than seven years and orders for costly manufactured goods plummeted, according to Commerce Department reports today that implied a steep recessionary downturn was at hand.
Spending that fuels two-thirds of US economic activity dropped 1 per cent, its biggest fall since the attacks against the United States seven years ago in September 2001.
It was a fourth straight monthly fall in spending and underlined how a credit crunch, falling home prices and steady job losses were sapping consumers' will and ability to spend.
Worse yet, a survey showed US consumer confidence fell to a 28-year low in November as mounting job losses, falling incomes and tumbling household wealth battered sentiment, highlighting the troubles for the economy ahead.
Orders for costly durable goods like cars, machinery and computers dropped by 6.2 per cent in October, more than twice as much as Wall Street economists had forecast, as demand weakened across nearly every major sector of manufacturing.
"The durables is not a pleasant number. It's horrid across the board," said Boris Schlossberg, director of currency research at GFT Forex in New York.
The only piece of relatively good news was a report from the Labor Department that new claims for jobless benefits fell by 14,000 last week. But that still left claims at a seasonally adjusted 529,000, well above levels that economists typically associate with recessionary economic conditions.
A four-week moving average of claims that irons out weekly fluctuations climbed to 518,000 last week from 507,000 the week before, its highest reading since January 1983.
The slew of weak data pushed US government bonds higher in price and the US dollar was down against the yen. US stocks fell early in the day. The deluge of data included a report showing business activity in the US Midwest contracted in November at a more severe rate than expected.
The Institute for Supply Management-Chicago business barometer fell to 33.8 from 37.8 in October. Economists had forecast the index at 36.7. A reading below 50 indicates contraction.
The Reuters/University of Michigan Surveys of Consumers said its final index reading of confidence for November fell to 55.3 from October's 57.6. That was its lowest since 1980.
The index came in well below economists' expectations of 57.7, according to the median of forecasts in a Reuters poll, and deteriorated sharply since the middle of the month, when lower gasoline prices had cheered many consumers.
Reuters