At the same time, the central bank may “aim to convince investors that tightening is not imminent,”

TO BE NOTED: From Bloomberg:

"Spending, Home Sales Probably Increased: U.S. Economy Preview

By Shobhana Chandra

June 21 (Bloomberg) -- Consumer spending in the U.S. probably rose in May for the first time in three months and home sales increased as Americans became more confident the recession will end this year, economists said before reports this week.

Purchases advanced 0.3 percent, according to the median of 58 estimates in a Bloomberg News survey ahead of Commerce Department figures due June 26. Combined sales of new and existing homes likely improved to 5.18 million, capping the first back-to-back increase since 2006, the survey showed.

“There’s more optimism as we get further away from last year’s financial-market chaos,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Spending on the part of consumers seems to be picking up after a soft patch. It looks like housing has bottomed.”

Government efforts to restore the flow of credit and prop up incomes are allowing households to take advantage of retailer discounts even as unemployment soars. Federal Reserve policy makers, meeting this week, may try to reassure investors that interest rates will stay low for the foreseeable future and acknowledge the economy has improved since their last gathering.

The Commerce Department’s spending report may also show incomes increased 0.3 percent in May after gaining 0.5 percent the prior month, mainly reflecting the tax cuts and transfers linked to the administration’s stimulus plan, economists said.

Home Sales

Sales of existing homes climbed 3 percent to an annual pace of 4.82 million, the highest level since October, when the economy was in the throes of the financial crisis, according to the survey median. Foreclosure-driven declines in property values are helping to reduce the glut of unsold houses. The National Association of Realtors’ report is due June 23.

The next day, Commerce data may show purchases of new homes rose 2.3 percent in May to an annual pace of 360,000.

In another sign of the improving economic outlook, the Reuters/University of Michigan final index of consumer sentiment probably rose to 69 in June, the highest level in nine months, from 68.7 in May, economists’ forecasts show. The figures are due on June 26.

Business in Las Vegas has “clearly bottomed out,” said Jim Murren, chief executive officer of casino company MGM Mirage. “It’s just a matter of how long we’re going to be on the bottom, and that is what we’re debating internally,” Murren said in a telephone interview last week. “The business trends are no longer deteriorating.”

More Upbeat

Fed officials on June 24, at the conclusion of their two- day meeting, may say the U.S. is showing signs of emerging from the worst recession in a half century. Following their last meeting in April, policy makers said the economy will “remain weak for a time.” The central bankers will also keep the benchmark interest rate in the range of zero to 0.25 percent, economists said.

“The Fed is likely to sound more upbeat on growth prospects,” Dean Maki, chief U.S. economist at Barclays Capital in New York, said in a note to clients. At the same time, the central bank may “aim to convince investors that tightening is not imminent,” he said.

Such an announcement may be an attempt by policy makers to prevent borrowing costs from climbing even more, undermining tentative signs of recovery. The yield on the benchmark 10-year note reached as high as 3.95 percent at the close on June 10, after being as low as 2.54 percent on March 18, the day the Fed announced it would buy Treasury securities in a bid to push borrowing costs down.

Some parts of the economy are lagging. A Commerce report due June 24 may show bookings for goods meant to last several years slid 0.8 percent in May, the survey showed. Durable-goods orders excluding transportation equipment may have also fallen.

Gross domestic product shrank at a 5.7 percent pace in the first quarter, the same as estimated in May, revised figures from Commerce may show. Following a 6.3 percent pace of contraction in the last three months of 2008, the drop capped the worst six-month performance in five decades. The figures are due on June 25.

                         Bloomberg Survey

================================================================
                      Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
================================================================
Exist Homes Mlns          6/23      May       4.68      4.82
Exist Homes MOM%          6/23      May       2.9%      3.0%
Durables Orders MOM%      6/24      May       1.7%     -0.8%
Durables Ex-Trans MOM%    6/24      May       0.4%     -0.4%
New Home Sales ,000’s     6/24      May       352       360
New Home Sales MOM%       6/24      May       0.3%      2.3%
GDP Annual QOQ%           6/25      1Q F     -5.7%     -5.7%
Personal Consump. QOQ%    6/25      1Q F      1.5%      1.5%
GDP Prices QOQ%           6/25      1Q F      2.8%      2.8%
Core PCE Prices QOQ%      6/25      1Q F      1.5%      1.5%
Initial Claims ,000’s     6/25     13-Jun     608       600
Cont. Claims ,000’s       6/25     6-Jun      6687      6707
Pers Inc MOM%             6/26      May       0.5%      0.3%
Pers Spend MOM%           6/26      May      -0.1%      0.3%
PCE Deflator YOY%         6/26      May       0.4%      0.1%
Core PCE Prices MOM%      6/26      May       0.3%      0.1%
Core PCE Prices YOY%      6/26      May       1.9%      1.8%
U of Mich Conf. Index     6/26     June F     69.0      69.0
================================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

more personal saving would be a positive step in the long run, analysts say. More saving leads to more investment

TO BE NOTED: From the NY Times:

Copyright 2009 The New York Times Company

"Shift to Saving May Be Downturn’s Lasting Impact

By CATHERINE RAMPELL

The economic downturn is forcing a return to a culture of thrift that many economists say could last well beyond the inevitable recovery.

This is not because Americans have suddenly become more financially virtuous or have learned the error of their free-spending ways. Instead, these experts say, Americans may have no choice but to continue pinching pennies.

This shift back to thrift may seem to be a healthy change for a consumer class known for spending more than it earns, but there is a downside: American businesses have become so dependent on consumer spending that any pullback sends ripples through the economy.

Fearful of job losses and anxious over housing and stock declines, Americans are squirreling away more of their paychecks than they were before the recession. In the last year, the savings rate — the percentage of after-tax income that people do not spend — has risen to above 4 percent, from virtually zero.

This happens in nearly every recession, and the effect is usually fleeting. Once the economy recovers, Americans revert to more spending and less saving. Over the last 30 years, the savings rate has fluctuated from over 14 percent in the 1970s to negative 2.7 percent in 2005, meaning Americans were spending more than they made.

This time is expected to be different, because the forces that enabled and even egged on consumers to save less and spend more — easy credit and skyrocketing asset values — could be permanently altered by the financial crisis that spun the economy into recession.

“I expect that the savings rate will end up at the end of this recession higher than it was going into it,” said Jonathan A. Parker, a finance professor at the Kellogg School of Management at Northwestern University. “It’s hard to see how it wouldn’t.”

Sustained increases in household saving would cause a difficult period of restructuring for the American economy, which has become increasingly driven by consumer spending. Such spending makes up about 70 percent of the nation’s gross domestic product.

Add the decline in consumer spending to the planned expiration of government stimulus spending, and a painful readjustment in demand for goods and services could occur, economists say. The effect would be felt here and abroad, as many developing economies also depend on America’s big-spending ways.

“If Americans cut back, as they almost have to do, what will replace that source of demand?” asked William G. Gale, director of the economic studies program at the Brookings Institution, a liberal-centrist policy research group.

“The easy answer is the Chinese consumer,” he said, but unlike their more prodigal American counterparts, the Chinese save about a quarter of what they earn. “We may cut back faster than they expand into that space, so there might be a lull.”

Why might the higher savings rate outlast the recession?

Social critics like David Blankenhorn, president of the Institute for American Values, hope that introspection about America’s “culture of consumption” will awaken Americans to the virtues of thrift, just as the Great Depression reset American financial values for a generation.

But many economists believe consumers will change their habits for more pragmatic reasons.

Consumers have lost a huge chunk of their net worth, in the housing bust and the stock market, and to resuscitate their retirement accounts or children’s college funds they will have to channel more of their paychecks toward saving — unless those asset markets soar again.

Forms of easy credit that were once prevalent, like mortgages with no down payments, also may not return, either because the government regulates them out of existence or because banks dare not venture back into such risky lending. That means if Americans want to buy a house, they will have to save more and borrow less.

Whether for reasons moral or otherwise, consumers are already thinking a bit differently about their long-term budgets. A recent Pew Research Center survey found that many more Americans had begun regarding products like microwave ovens as luxuries rather than necessities.

Such attitudes suggest that retailers will have to change their marketing strategies, said J. Walker Smith, executive vice chairman of the Futures Company, a marketing and research consultancy.

“People are realizing they can’t accumulate everything they want anymore, and they’ll have to prioritize more,” he said. “That may be hard for a lot of brands — figuring out not only how to get considered by consumers, but put at the top of their list.”

Consumers planning big purchases are also anticipating that their borrowing options will remain limited.

Last year, Aryn Kennedy and her husband, Brian Ewing, who live in Los Angeles, spent “every dollar” they earned on debt repayment and living expenses. When local housing prices began to fall, Mr. Ewing toyed with the idea of a low-down-payment mortgage.

“By the time we really started looking at buying, I knew from reading blogs that most loans like that were not really available anymore, since lenders didn’t want to take risks,” said Ms. Kennedy, who said she was suspicious of such offers anyhow.

Since then, through “windfalls” like a salary increase for Mr. Ewing, and by cutting expenses for clothing, entertainment and other items, Ms. Kennedy says the couple has begun saving about 25 percent of their take-home pay in anticipation of making a traditional down payment of 20 percent on a house.

Even after they buy, Ms. Kennedy said, the couple plans to keep saving 25 percent of their pay. A recent Gallup poll found that most Americans who have recently increased their savings believe their budget adjustments represent a “new, normal pattern for years ahead.”

Despite the immediate jolt to the economy, more personal saving would be a positive step in the long run, analysts say. More saving leads to more investment, which promotes economic growth, which leads to better living standards.

At the family level, social critics, economists and even many consumers seem to agree that a forced financial conservatism may be for the better.

Kenny Tran of Santa Ana, Calif., for example, said he had been nervous about saving enough to buy his first house — he and his fiancé have been setting aside about $800 a month for the last year and a half — but he has no regrets about not buying a home when credit was looser and saving was less of a priority.

“A couple years ago it would have been easier for us to get a loan,” despite the fact that the couple’s combined income was lower, Mr. Tran said. “But if we would have gotten a loan, and a house, a couple years ago, we’d probably have ended up in foreclosure now.”

Companies trimmed stockpiles at a $103.7 billion annual rate last quarter, the biggest drop since records began in 1947

TO BE NOTED: From Bloomberg:

"Economy in U.S. Shrank at 6.1% Rate in First Quarter (Update2)

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By Bob Willis

April 29 (Bloomberg) -- The U.S. economy plunged again in the first quarter, capping its worst performance in five decades, reflecting a record slump in inventories and further declines in housing.

Gross domestic product dropped at a 6.1 percent annual pace, more than forecast, after contracting at a 6.3 percent rate in the last three months of 2008, the Commerce Department said today in Washington. The report, which marked the weakest six months since 1957-58, comes as Federal Reserve policy makers meet for a second day.

Smaller stockpiles may set the stage for a return to growth in the second half of the year amid signs Fed efforts to reduce borrowing costs and unclog lending are starting to pay off. The recession persisted even as lower gasoline prices and larger tax refunds helped bring an end to the worst slump in consumer spending in almost three decades.

“This is one of those good-bad numbers,” Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said in a Bloomberg Television interview. “Businesses are running about as lean as they possibly can be. It sets up the reality that any sort of increase in demand will cause firms to have to increase production.”

As a result, Naroff predicted growth won’t “be nearly as bad in the current quarter, and will probably be reasonably good.”

Stock-Index Futures

Stock-index futures were higher, with futures on the Standard & Poor’s 500 Index up 1.1 percent at 860.9 as of 8:50 a.m. in New York. Treasuries were little changed, with benchmark 10-year notes yielding 3 percent.

The median forecast of 71 economists surveyed by Bloomberg News projected GDP, the sum of all goods and services produced, would shrink at a 4.7 percent pace. Estimates ranged from declines of 2.8 percent to 8 percent.

The world’s largest economy shrank 2.6 percent in the first quarter compared with the same period a year earlier. Today’s advance report on GDP is the first of three estimates on first- quarter growth.

Consumer spending, which accounts for about 70 percent of the economy, climbed at a 2.2 percent annual pace last quarter, the most in two years. Purchases dropped at an average 4.1 percent rate in the last half of 2008, the biggest slide since 1980.

Stockpiles Plunge

Companies trimmed stockpiles at a $103.7 billion annual rate last quarter, the biggest drop since records began in 1947. Excluding the reduction, the economy would have contracted at a 3.4 percent pace.

“This is the combination you want for a turn in the economy -- better sales and an inventory correction,” John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, said before the report.

Companies cut total spending, including equipment, software and construction projects, at a record 38 percent annual pace.( NB DON )

Residential construction also decreased at a 38 percent pace last quarter, the most since 1980.

One reason for the larger-than-projected decline in GDP was that government slashed spending at a 3.9 percent pace, the most since 1995. The drop reflected cutbacks in defense spending and the biggest decrease in state and local government outlays since 1981.

Trade Gap

A smaller trade gap added 2 percentage points to growth last quarter. The deficit shrank as imports collapsed at a 34 percent annual pace, the most since 1975, which reflected the reduction in stockpiles.

Should the economy shrink again in the second quarter as projected by economists surveyed this month by Bloomberg, the recession that began in December 2007 would be the longest since the Great Depression.

Recent announcements by companies including General Motors Corp. indicate that will be the case. GM last week said it will idle 13 U.S. assembly plants for multiple weeks to trim production by 190,000 vehicles from May through July. Sales in its home market fell 49 percent this year through March.

General Motors and Chrysler LLC are threatened with bankruptcy as sales have plummeted since credit markets seized last year.

Still, data in recent weeks, including signs of stability in home sales, residential construction and consumer confidence, signal the world’s largest economy may shrink at a slower pace.

Fed Purchases

Part of the improvement may be due to government efforts to stem the recession. In its last meeting on March 18, the Fed pledged to double mortgage-debt purchases to $1.45 trillion and buy as much as $300 billion in long-term Treasuries. That’s helped bring down rates on mortgages and auto loans.

The central bank’s statement today, due at around 2:15 p.m., may acknowledge that the pace of economic decline has moderated in the past six weeks and may reiterate it will keep the benchmark rate low for an extended period and continue to boost its balance sheet to revive lending.

The Fed’s preferred measure of inflation, which tracks consumer spending and excludes food and fuel costs, rose at a 1.5 percent annual pace last quarter, toward the lower end of central bankers’ longer-term forecasts.

Ford Motor Co., working to avoid a federal bailout, is among companies seeing some improvement. The automaker last week posted a first-quarter loss that beat analysts’ estimates.

“We’re not quite sure where the bottom is,” Ford’s Chief Executive Officer Alan Mulally said in an April 24 Bloomberg Television interview. “But we believe with the stabilization of the banks, freeing up the credit, and the stimulus packages we have, both monetary and fiscal, that we’re going to see an uptick in the third and fourth quarter.”

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net"

consumers are notoriously bad at predicting their expenditure levels, even those a month or two away

TO BE NOTED: From the NY Times:

Consumer Cutbacks: Temporary or Permanent?

By Catherine Rampell

A recent Gallup poll asked consumers whether they were reducing their spending and/or increasing their saving, and if so, whether they expected those changes to be temporary or permanent. A surprisingly large group said they expected to be resetting their expenditure and savings levels for good:

Gallup

It’s hard to say how reliable these self-reported responses are. As we’ve noted before, consumers are notoriously bad at predicting their expenditure levels, even those a month or two away.

If these self-reports are correct, however, they will have important implications for the economy, given that consumer spending makes up about 70 percent of gross domestic product."

The tax refunds have gotten to people in a timely fashion. Once that feeds through, then we’re left with the major negative of the labor market

TO BE NOTED: From Bloomberg:

"Retail Sales Probably Rose, Output Fell: U.S. Economy Preview

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By Bob Willis

April 12 (Bloomberg) -- U.S. retail sales probably rose in March even as a drop in factory production and slower inflation signal the recession is far from over, economists said before reports this week.

Purchases increased 0.3 percent, the second gain in the last three months, according to the median estimate in a Bloomberg survey before the Commerce Department’s April 14 retail report. Industrial production dropped 0.9 percent, the 14th decline in the last 15 months, figures from the Federal Reserve may show.

Tax refunds and money from President Barack Obama’s stimulus plan are giving American consumers a temporary lift, easing the pain caused by the highest unemployment rate in a quarter century, plunging wealth and a lack of credit. Companies from General Motors Corp. to Gap Inc. are relying on incentives and promotions to move merchandise, keeping inflation in check.

“We’re seeing a little bit of a bounce from the consumer after a horrendous holiday season,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm. “The tax refunds have gotten to people in a timely fashion. Once that feeds through, then we’re left with the major negative of the labor market.”

Autos sold at a 9.9 million annual pace in March, up from 9.1 million the previous month that was the lowest since 1981, according to industry figures. Incentive spending by automakers on each sale jumped 30 percent from a year earlier to a record $3,169, according to research firm Edmunds.com.

‘Sign of Hope’

“It’s one month in a row, and it’s of interest and there may be a small sign of hope,” Chrysler LLC President Jim Press said on an April 2 call with reporters about the automaker’s results. “But if you look at the trends out there, there’s a lot of concern.”

Sales at clothing retailers including Gap and Limited Brands Inc. fell less in March than analysts projected as promotions lured shoppers. Still, large discounters like Wal- Mart Stores Inc. and department stores didn’t fare as well.

Consumer spending, which accounts for 70 percent of the economy, probably rose at a 0.5 percent rate in the first quarter, according to economists surveyed by Bloomberg last week. Purchases fell by an average 4 percent rate in the second half of 2008, the longest slide since 1991.

The gain will help slow the decline in growth. The world’s largest economy shrank at a 5 percent pace in the first three months of the year, following a 6.3 percent rate of contraction in the previous quarter that was the worst performance since 1982, according to the survey last week.

Trimming Stockpiles

Manufacturers cut output to trim the glut of stockpiles that piled up as spending sank at the end of 2008, contributing to the drop in gross domestic product. The projected drop in industrial production follows a 1.5 percent decrease a month earlier, economists said the Fed may report on April 15.

The first simultaneous global recession since World War II has caused prices to soften. The cost of living probably fell 0.1 percent in the 12 months ended March, according to economists surveyed ahead of the Labor Department’s consumer- price report on April 15. It would be the first year-over-year drop since 1955.

“Inflation will remain subdued,” the Fed said in its March 18 policy statement. The central bank has lowered its key rate to near zero and is flooding the market with cash to spur borrowing and spending.

Prices Soften

Prices at the wholesale level, due from the Labor Department a day earlier, were probably down 2.2 percent in March from the same time last year, according to the survey.

Other reports this week are projected to show home construction and consumer confidence held above recent lows. Commerce Department figures on April 16 may should housing starts dropped last month after surging in February. Still, the estimated 540,000 homes at an annual pace would be higher than the record low 477,000 reached in January.

The Reuters/University of Michigan preliminary consumer sentiment index for April, due on the 17th, rose to 58 from 57.3 last month, according to economists surveyed. The measure was at a three-decade low of 55.3 in November.

“All these indicators are still at extremely low levels,” Paul Dales, an economist at Capital Economics Ltd. in London, said in a note to clients. “So rather than being consistent with a recovery, they are simply showing that activity is no longer in freefall as it was at the end of last year.”

                        Bloomberg Survey

================================================================
                       Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
================================================================
PPI  MOM%                 4/14     March      0.1%      0.0%
Core PPI MOM%             4/14     March      0.2%      0.1%
PPI  YOY%                 4/14     March     -1.3%     -2.2%
Core PPI YOY%             4/14     March      4.0%      4.0%
Retail Sales MOM%         4/14     March     -0.1%      0.3%
Retail ex-autos MOM%      4/14     March      0.7%      0.1%
Business Inv. MOM%        4/14      Feb.     -1.3%     -1.2%
CPI  MOM%                 4/15     March      0.4%      0.1%
Core CPI MOM%             4/15     March      0.2%      0.1%
CPI  YOY%                 4/15     March      0.2%     -0.1%
Core CPI YOY%             4/15     March      1.8%      1.7%
Empire Manu. Index        4/15     April     -38.2     -35.0
Net Long Term TICS $ Bl   4/15      Feb.     -43.0      17.5
Total TICS $ Blns         4/15      Feb.     -148.9     70.0
Ind. Prod. MOM%           4/15     March     -1.5%     -0.9%
Cap. Util. %              4/15     March     70.2%     69.7%
NAHB Housing Index        4/15     April       9         10
Initial Claims ,000’s     4/16     11-Apr     654       660
Cont. Claims ,000’s       4/16     4-Apr      5840      5858
Housing Starts ,000’s     4/16     March      583       540
Building Permits ,000’s   4/16     March      564       549
Philly Fed Index          4/16     April     -35.0     -32.3
U of Mich Conf. Index     4/17    March F     57.3      58.0
================================================================

"Consumer spending in the U.S. fell less than forecast"

Interesting news on Bloomberg:

"By Bob Willis and Courtney Schlisserman

Dec. 24 (Bloomberg) -- Consumer spending in the U.S. fell less than forecast as cheaper gasoline left Americans with more cash( GOOD NEWS ), while jobless claims climbed to a 26-year high( BAD NEWS ), signaling purchases will keep sliding into 2009.

Spending dropped 0.6 percent in November, and rose for the first time in six months after accounting for inflation, the Commerce Department said today in Washington. First-time unemployment benefit claims jumped to 586,000( BAD NEWS ), and durable-goods orders declined less than anticipated( GOOD NEWS ), other reports showed.

The deteriorating job market means consumers will probably further rein in spending( TRUE ); economists including those at Morgan Stanley estimate more than 400,000 people will lose their jobs this month. The outlook forced Sears Holdings Corp., the largest U.S. department-store company, earlier this month to abandon its earnings forecast for the rest of the year.

“The economy continues to struggle and unfortunately the first half( I AGREE ) of 2009 does not look very good,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York. “We look for a further contraction and a continued acceleration in the pace of layoffs.”

Gasoline prices fell by a total of 50 percent in October and November, and discounts by retailers from Toys “R” Us Inc. to Wal-Mart Stores Inc. helped prevent a bigger drop in purchases last month. Today’s Commerce report also showed that the gain in spending adjusted for inflation was the biggest in almost two years( GOOD NEWS ).

Spending Outlook

“The increase in real spending is unlikely( UNLIKELY IS FINE ) to be sustained with the job losses we are seeing,” said Benjamin Reitzes, an economist at BMO Capital Markets in Toronto. The gain last month “was more a technicality based on the drop in gasoline prices( HOWVER<>

Stocks were little changed after today’s reports. The dollar remained lower, while Treasuries advanced. The Standard & Poor’s 500 Stock Index was up 0.2 percent at 864.56 at 10:14 a.m. in New York, benchmark 10-year note yields slipped to 2.17 percent from 2.18 percent late yesterday, and the dollar lost 0.5 percent against the euro to $1.3994.

A separate Commerce report showed orders for durable goods in November fell 1 percent( NOT BAD ), after an 8.4 percent decrease in October that was bigger than previously reported. Excluding a slump in transportation gear, orders for goods designed to last several years unexpectedly increased.

Capital Goods

Bookings for non-defense capital goods excluding aircraft, a measure of future business investment, increased 4.7 percent( GOOD NEWS ), the most since September 2006, after a 6.6 percent slump in October. Shipments of those items, used in calculating gross domestic product, rose 0.2 percent( GOOD NEWS ).

“Orders were so down in the previous months that there’s probably a little payback for that( WE'LL TAKE IT. HOWEVER, THIS WOULD SUPPORT MY VIEW THAT WE WENT DOWN MORE THAN WE WOULD FUNDAMENTALLY HAVE DUE TO THE FEAR AND AVERSION TO RISK ),” Robert Stein, senior economist at First Trust Advisors in Lisle, Illinois, said before the report.

Today’s Labor Department report showed that the four-week moving average of claims, a less volatile measure, also was the highest since 1982, at 558,000 for the week to Dec. 20. Initial claims were projected to increase to 558,000, according to the median of 32 forecasts in a Bloomberg News survey.

The number of people staying on benefit rolls fell to 4.37 million in the week ended Dec. 13 from 4.387 million.

Rising joblessness contributed to a drop in personal income last month. The Commerce figures showed income fell 0.2 percent in November after being unchanged the prior month( NOT GOOD ).

Hit to Income

“Given the further increase in jobless claims,” wage and salary income “is likely to further decelerate in the near term,” Deutsche’s Riccadonna wrote in a note to clients.

The drop in consumer spending last month extended declines to a record fifth consecutive decline, the Commerce Department said. Economists forecast unadjusted spending would fall 0.7 percent, according to the median of 64 estimates in a Bloomberg News survey.

Today’s report also confirmed inflation is retreating as demand wanes. Prices plunged 1.1 percent, also the biggest since records began in 1992. The gauge increased 1.4 percent from November 2007, the smallest gain in six years. The Fed’s preferred price measure, which excludes food and fuel, was unchanged for the second consecutive month, the first time that’s happened since 1999.( TRUE )

Gasoline Price

The average price of unleaded regular gasoline at the pump fell by $1 to $2.11 in November from the prior month, according to AAA, leading the drop in overall prices.

The decrease in spending pushed the savings rate up to 2.8 percent from 2.4 percent in October. A positive rate suggests consumers are restraining spending to boost savings( THIS RATE IS FINE ).

Even after the bump in November sales, retailers are concerned about the holiday shopping season, which brings in one- third or more of annual revenue. The International Council of Shopping Centers and Goldman Sachs Group Inc. said yesterday that November-December sales may fall as much as 2 percent. The ICSC had previously projected a drop of as much as 1 percent.

“Given the current economic and retail environment, we will carefully evaluate alternatives that provide financial flexibility in the near-term,” Sears’s interim Chief Executive Officer W. Bruce Johnson said in a statement.

Consumer spending dropped at a 3.8 percent annual pace in the third quarter( NOT GOOD ), the biggest plunge since 1980, revised Commerce figures showed yesterday. The economy shrank 0.5 percent. Economists surveyed by Bloomberg forecast the economy will contract through the first half of 2009."

A better report than expected.

"So, did American consumers cut back on borrowing? Not if they had a credit card! "

Henry Blodget on the transition from home equity loans to credit cards:

"Consumer spending plunged in Q3, and it's likely to continue to get worse. Why? Because U.S. consumers are broke, and the number of folks eager to lend us money despite this condition has gotten a lot smaller.

We were broke in 2000, but we were able to borrow money to spend by tapping the "equity" in our houses. Now we can't tap that equity anymore (because it's gone), so we've moved on to credit cards. Lenders are wising up to this, though. And then where's our spending money going to come from?"

Read the whole post.