Consumer Spending Probably Rose in August: U.S. Economy Preview

Consumer spending probably rose in August for a fourth consecutive month as demand for autos reached an almost six-year high, economists said before reports this week.

Purchases increased 0.3 percent after a 0.1 percent advance in July, according to the median forecast in a Bloomberg survey of 64 economists before Commerce Department data Sept. 27. Other reports may show a pickup in orders for big-ticket items other than transportation equipment and an increase in new-home sales.

A falling jobless rate may be making Americans feel more secure in their jobs, while rising real-estate values and record stock prices give households the means to spend. Automakers, including Ford Motor Co., are reaping the benefits of pent-up demand and easier access to credit that is helping sustain the economic expansion.

“People are a little more encouraged about the job market, which is getting gradually less bleak,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “It’s a general trend of improvement we’re seeing in the economy.”

The Commerce Department’s spending figures this week will also show personal income rose 0.4 percent in August, the biggest gain since February, after a 0.1 percent gain a month earlier, the survey showed. Faster job gains would help drive wage increases needed to give household purchases a biggest lift.

Business Investment

Businesses, too, are increasing their spending and giving a boost to manufacturing. Excluding the volatile transportation category, orders for durable goods rose 1 percent in August after falling 0.8 percent the prior month, according to the median forecast of economists surveyed before a Sept. 25 report from the Commerce Department.

The auto industry is at the forefront of the manufacturing rebound, with Ford, General Motors Co. and Toyota Motor Corp. reporting U.S. sales gains in August that exceeded analysts’ estimates. Sales of cars and light trucks rose 15 percent at GM, 23 percent at Toyota and 12 percent at Ford, the companies reported.

Federal Reserve policy makers sounded a cautionary note on the economy last week when they unexpectedly chose to continue their record monthly stimulus.

“Conditions in the job market today are still far from what all of us would like to see,” Chairman Ben S. Bernanke said after a two-day meeting of the Federal Open Market Committee. “The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth.”

Payroll Count

Employers created 169,000 jobs last month, fewer than economists projected, and increases in the prior two months were revised down, Labor Department figures showed this month. The unemployment rate fell as workers left the labor force.

The record-low mortgage rates resulting from the Fed’s policy boosted demand for houses and property values. The S&P/Case-Shiller index of home prices in 20 cities rose 12.4 percent in July from the same month in 2012, the biggest gain since February 2006, according to the Bloomberg survey median ahead of the group’s report on Sept. 24.

Borrowing costs began climbing in June amid speculation the Fed was on the verge of trimming stimulus. The rate on a 30-year fixed mortgage averaged 4.58 percent in the week ended Aug. 22, compared with 3.35 percent as recently as early May. The jump slowed the real-estate rebound, with housing starts and sales of new houses lagging behind economists’ forecasts.

Home Sales

Another report this week may show the market is starting to adjust to the jump in financing costs. Purchases of new houses climbed to a 420,000 annual rate in August after plunging in July by the most in three years, economists project a Commerce Department report on Sept. 25 will show. Even with the gain, the purchase pace would fall short of the average 448,000 rate in the first six months of the year.

Other reports this week may show the rebound in consumer confidence has stalled as interest rates rise and concern mounts the federal government will be forced to shut down if officials fail to reach a compromise on increasing the debt ceiling, according to economists surveyed.

Stocks fell at the end of last week as concerns grew about the timing of Fed stimulus cuts and political wrangling over government spending. The Standard & Poor’s 500 Index dropped 0.7 percent to close the week at 1,709.91, falling for a second day after reaching a record on Sept. 18.

Also this week, a Commerce Department report on Sept. 26 will show the economy grew at a 2.6 percent annual rate in the second quarter, revised up from a prior estimate of 2.5 percent, the Bloomberg survey showed.

                       Bloomberg Survey
                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
Case Shiller Monthly MO   9/24      July      0.9%      0.8%
Case Shiller Monthly YO   9/24      July     12.1%     12.4%
Consumer Conf Index       9/24     Sept.      81.5      80.0
Durables Orders MOM%      9/25      Aug.     -7.4%     -0.2%
Durables Ex-Trans MOM%    9/25      Aug.     -0.8%      1.0%
Cap Goods Core MOM%       9/25      Aug.     -4.0%      2.0%
New Home Sales ,000’s     9/25      Aug.      394       420
GDP Annual QOQ%           9/26      2Q A      2.5%      2.6%
Initial Claims ,000’s     9/26     21-Sep     309       325
Pers Inc MOM%             9/27      Aug.      0.1%      0.4%
Pers Spend MOM%           9/27      Aug.      0.1%      0.3%
U of Mich Conf. Index     9/27    Sept. F     76.8      78.0
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