Arthur J. Villasanta – Fourth Estate Contributor
Washington, DC, United States (4E) – U.S. consumer spending over the past seven months will likely prompt the U.S. Federal Reserve to raise interest rates for the last time this year in December. It will be the fourth Fed rate hike for 2018.
Consumer spending accounts for more than two-thirds of U.S. economic activity, said the U.S. Department of Commerce. It nudged upwards 0.6 percent in October as households spent more on prescription medicines and utilities
Consumer spending in September was revised downwards. It rose just 0.2 percent instead of the previously reported 0.4 percent gain.
Adjusted for inflation, consumer spending rose 0.4 percent. This was the biggest gain in seven months and underscored a solid pace of consumption early in the fourth quarter.
Strong consumer spending notwithstanding, there are indications economic growth is slowing. Data for November suggests a deceleration in business spending on equipment; a deterioration in the trade deficit and further weakness in the housing market, which is projected to see higher prices in 2019.
The Department of Labor showed the number of Americans filing applications for jobless benefits increased to a six-month high last week, indicating a drop in job growth.
Initial claims for state unemployment benefits rose 10,000 to a seasonally adjusted 234,000 for the week ended Nov. 24, the highest level since the mid-May. Claims have now risen for three straight weeks.
Growth estimates for the fourth quarter stand at 2.5 percent on an annualized rate. The economy grew at a 3.5 percent pace in the third quarter.
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