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Rise in US consumer spending signals strengthening recovery

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US consumer spending rose in October. Photo: Bloomberg News

US consumer spending rose in October. Photo: Bloomberg News

US consumer spending rose in October. Photo: Bloomberg News

US consumer spending and housing sales rose more than expected in October while new claims for jobless benefits fell sharply last week, suggesting the economic recovery was gaining traction.

An unexpected decline in orders for long-lasting US manufactured goods, however, tempered some of the optimism and was a reminder that recovery from the most brutal recession in 70 years would be gradual.

The Commerce Department yesterday reported that consumer spending, which usually accounts for over two-thirds of US economic activity, increased 0.7pc last month after falling 0.6pc in September. That was above market expectations for a gain of 0.5pc.

"Certainly everybody is looking for the consumer to begin to step up here a little bit in the economy, so this is positive data," said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills in New York.

The Labour Department said initial claims for state unemployment benefits slid to 466,000 last week from 501,000 the previous week in the fourth consecutive week of declines.

The figure was well below market expectations for 500,000.

And sales of newly built US single-family homes jumped 6.2pc in October to a one-year high, the government reported.

US stocks rose on the jobless claims and housing data, which was viewed as a sign that the battered labour market was gradually healing. Prices of US government bonds, a traditional safe-haven investment, extended losses.

The Commerce Department reported sales of newly built US single-family homes rose to a 430,000 units, from 405,000 units in September. That beat market expectations for a 410,000 unit pace.

The rise in sales pushed the supply of new homes on the market last month down to 239,000 units, the lowest level since May 1971.

Analysts said the housing data was a good sign for the economy, but cautioned that gains reflected buyers' rush to take advantage of the government's $8,000 (€5,300) tax credit for first-time buyers that had been scheduled to expire on November 30.

That credit has since been extended into next year.

Irish Independent