SalemNews.com, Salem, MA

Business

December 8, 2012

Americans in mood to spend at start of holiday

WASHINGTON — Consumer confidence held close to a seven-month high last week as the holiday-shopping season put more Americans in the mood to spend, and claims for unemployment benefits declined.

The Bloomberg Consumer Comfort Index eased to minus 33.8 in the period ended Dec. 2 from minus 33. The reading, within the margin of error of 3 percentage points, was the 11th straight above minus 40, a point associated with recessions and their aftermath. Jobless claims decreased by 25,000 to 370,000 in the week ended Dec. 1, the Labor Department said.

Holiday shoppers are taking advantage of discounting, expanded store hours and Internet deals, explaining why a gauge of the buying climate climbed to a five-year high. While confidence is getting a lift from cheaper gasoline and an improving job market, failure by lawmakers to prevent automatic tax increases threatens to throttle the household spending that accounts for 70 percent of the economy.

"I don't expect that consumers will hold back during the holidays," said Dean Maki, chief U.S. economist at Barclays Plc in New York. "I think the bigger risk is that as we move into the first quarter, if there's not a resolution on the fiscal 'cliff,' " Americans would cut back as their after-tax incomes decline.

The drop in claims was the third straight. The mid-Atlantic region, which employs about 14 percent of U.S. workers, is recovering after Sandy. Apart from the storm-related damage, which may also be reflected in the November payrolls report Friday, employers will probably curb hiring until the risks from the global slowdown and looming fiscal tightening dissipate.

A recovery in third-quarter household worth, boosted by higher stock values and home prices, may also make Americans more inclined to spend. Net worth for households and nonprofits increased by $1.72 trillion from July through September, or 2.7 percent from the previous three months, to $64.8 trillion, the Federal Reserve said Thursday from Washington in its flow of funds report.

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