U.S. spending increased in November for the fifth consecutive month

U.S. spending increased in November for the fifth consecutive month and intensified corporate purchasing of equipment, more evidence the U.S. economy is winning the game in 2011.

Household purchases increased 0.4 percent after increasing 0.7 percent in October, which was almost two times higher than previously estimated, the Commerce Department figures showed today in Washington. The agency also reported a 2.6 percent gain in stocks of capital goods such as computers and electronic equipment.

rising incomes and stock prices are giving consumers the means to power purchases account for 70 percent of the world's largest economy, improving the earnings prospects of companies such as Bed Bath & Beyond Inc. A drop in applications for jobless benefits reported today shows that employers are reducing the pace of layoffs, a step towards reducing unemployment near a 26-year high.

"The recovery is moving at top speed," said Jim O'Sullivan, chief economist of MF Global Ltd. in New York. "The unemployment rate will gradually drop, which in turn should reduce downward pressure on inflation."

first-time filings for unemployment insurance declined in 3000 to 420,000 in the week ended Dec. 18, according to Labor Department figures released today.

Another report today showed a measure of consumer confidence rose to a maximum of six months in December. The index of Thomson Reuters / University of Michigan final consumer sentiment rose to 74.5, from 71.6 in November. The preliminary reading was 74.2 in December.

Stocks, Treasuries

The shares were little changed after the reports. 500 of Standard & Poor's dropped from 0.1 to 1,257.03 at 11:40 am in New York. The index has risen more than 12 percent this year on prospects for economic growth. Treasuries fell, sending the yield on the benchmark 10-year to 3.38 percent from 3.35 percent late yesterday.

Today's reports add to a series of better than expected data that have led economists to raise their estimates for economic growth. Retail sales rose more than expected in November, the trade deficit narrowed as exports jumped to a maximum of two years in October, and the regional figures, as well as across the country showed the factories are increasing production.

Economists at Morgan Stanley in New York today increased its estimate of up to consumer spending this quarter to 4.1 percent from 3.5 percent. Projected the economy will expand at a rate of 4.5 percent in October-December period, compared with a previous estimate of 4.3 percent.

Tax Cuts Extended

The extension of the Bush cuts on income tax for two years, a reduction in payroll tax next year and the Federal Reserve plan to buy $ 600 billion of Treasuries are rising optimism.

Housing remains a weak spot for the economy as a projection of unsold properties on the market weight. Purchases of existing homes rose 5.5 percent to a 290,000 annual pace of 275,000 in October, which was slower than previously estimated, the Commerce Department said today.

"While the economic environment has stabilized and is improving it may, it seems as if the consumer continues to face challenges as a result of the macroeconomic environment, such as historically high unemployment rates," said Leonard Feinstein, co-chairman of Bed Bath & Beyond, in a conference call yesterday.

Forecast earnings

Union, New Jersey, Bed Bath & Beyond yesterday raised its forecast fiscal-year earnings as much as $ 2.90 per share, from a previous forecast of $ 2.76.

Economists predict that consumer spending would rise 0.5 percent. Estimates ranged from increases of 0.1 percent to 0.8 percent. The October gain changes in spending the most since August 2009.

Inflation remained below the comfort zone of the Federal Reserve. The central bank move preferential prices, which excludes food and fuel, rose 0.1 percent from the previous month and rose 0.8 percent from a year earlier, matching the gain in 12 months in October as the smallest history.

The economy grew at a rate of 2.6 percent in the third quarter, the government reported yesterday. Consumer spending grew at a rate of 2.4 percent, the fastest since the first three months of 2007.

Unemployment rate

The growth was not fast enough to reduce unemployment, which rose last month to 9.8 percent. Fed officials last week continued its program to purchase up to an additional $ 600 billion in Treasuries in June to try to boost prices in the economy and support.

"Consumer spending has moved into a period of healthy growth and we believe that even if we do not keep the pace extremely strong in the fourth quarter, consumer spending will grow strongly in 2011," said Dean Maki, chief U.S. economist Barclays Capital Inc. in New York.

Today's report of durable goods, the Commerce Department showed that total orders fell 1.3 percent, pressured by the ongoing demand for airplanes, and reserves excluding transportation equipment rose more than expected.

Capital spending has been a source of strength for the world's largest economy, while household purchases are starting to accelerate. Manufacturing industry helped pull the U.S. the worst recession since the 1930's, has remained strong throughout the recovery, driven in part by foreign demand for American-made goods.

Major benefits

Some manufacturers are projecting higher earnings as orders increase. Joy Global Inc., the manufacturer of P & H Joy Mining equipment.

"The rate of stock enhancement supports our view that mining customers continue to increase their capital spending plans," said Mike Sutherlin, CEO of Milwaukee-based company said in a statement on 15 December. "We continue to increase our production to meet forecasted demand growth."