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Personal Spending in US Rises as Wage Growth Underwhelms

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Personal Spending in US Rises as Wage Growth Underwhelms

Personal spending in the United States rose faster than earnings last month, as Americans loosened their pockets for the holiday season.

Consumer spending increase 0.5 percent in November, as shoppers took advantage of year-end discounts. The holiday season is by far the most important for American retailers, who rolled out discounts in an effort to boost revenues. Year-end holiday shopping accounts for as much as 40 percent of US retailers’ annual revenues, according to the National Retail Federation.

Although earnings growth was unable to keep pace with holiday shopping, personal income showed a marked improved from the prior month. Personal income rose 0.2 percent in November following a 0.1 percent decline the prior month. A median estimate of analysts polled called for a monthly gain of 0.5 percent.

The US retail sector is rebounding in the fourth quarter, as bargain hunters continue to take advantage of holiday discounts. Retail purchases increased 0.7 percent in November, according to official data from the Commerce Department.

Lower gas prices, a bullish equities market and modest wage growth have increased consumer optimism over the past several months. Consumer confidence reached a five-month high in December, according to the Reuters/University of Michigan Consumer Sentiment Index. The index posted a reading of 82.5 in December, more than 7 points higher than the prior month.

“Personal finances, the most critical factor that shapes consumer spending, did improve late December, although largely due to rising incomes and wealth among those in the top third,” wrote Reuters/UofM survey director Richard Curtin.

In addition to personal finances, American consumers are more optimistic about job prospects and the broader economic outlook. The US economy added more than 200,000 private jobs for the second time in as many months in November, prompting the Federal Reserve to revise its bond purchase program. The Fed will begin paring monthly asset purchases by $10 billion beginning in January.

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