The decrease in wage pushed Americans to buy more affordable or discounted products for the holiday season. Due to this event, consumer spending turned out to be less than what was predicted last November.
Based on the data from the U.S. Department of Commerce, presented in Washington last December 23, the personal spending of the Americans increased by 0.1 percent while wages and salaries dropped by 0.1 percent. Coming from the same report, durable goods orders climbed 3.8 percent higher while aircraft bookings had a decrease in demand for business equipment.
John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC, said that consumers are optimistic. However, Hermann said that they have been noticed a “… slight cooling of the orders book for manufacturing…,” as the bonus allowances pass away. He also added that the manufacturing may also be affected by the slowing economic growth rate on euro zones.
One of the retailers that offer discounted merchandise to people during this holiday season is Target Corp. The said retailer conduct this holiday promotions as customers usually hold back shopping if the products they want to purchase are too expensive. Though consumer spending will definitely become better as compared to the last three months, a possible cooling in manufacturing may take place as the tax incentive on equipment purchases will end next week.
According to the news survey conducted by Bloomberg on 79 economists, the average percent gain that the economy may get is 0.3 percent. The estimates shared by the respondents ranged from 0.2 to 0.6 percent.
The Europe’s debt crisis began affecting the U.K. services industry. Office for National Statistics in London said that the output in the services decreased by 0.7 percent in October. This output is responsible for about 75 percent of the U.K.’s economy.
In Asia, on the other hand, the industrial production in Singapore experienced a sudden fall last November for the first time after six months of good and stable condition. The Economic Development Board reported that the manufacturing sector of Singapore, which accounts for more than 20 percent of the country’s economy, had a 9.6 percent drop last year.
The economists at Nomura Securities International Inc. in New York said in an e-mail that there would be a growth of 3 percent annual rate in consumer spending throughout the end of the quarter. Economists at JPMorgan Chase & Co. said that consumption patterns are becoming weaker. They forecasted an annual growth rate of 2.5 percent to 3 percent throughout the quarter.
From the previous quarter, the U.S.’s economy increased at a 1.8 percent annual rate due to a rise in household spending at 1.7 percent rate.
In November, the U.S. wage surged up at 0.1 percent, lower than the 0.4 percent increase last October.