Consumers, Companies Shrug Off Fiscal Cliff Fears; Spending Rose In Nov By The Most In 3 Years
By Jason Lange
WASHINGTON | Fri Dec 21, 2012 9:21am EST
(Reuters) - Consumer spending rose in November by the most in three years and a gauge of planned business spending jumped, signs that households and companies are shrugging off some of the fears tighter fiscal policy could cause a recession.
The Commerce Department said on Friday inflation-adjusted consumer spending rose 0.6 percent, while after-tax income climbed 0.8 percent when adjusting for changes in prices.
Many economists think business and consumers are wary of automatic government spending cuts and tax increases scheduled to kick in early next year, a scenario known in Washington as the "fiscal cliff."
"The economy is holding in here at the end of the year despite the concerns about the fiscal cliff," said Gary Thayer, an economic strategist at Wells Fargo Advisors in St. Louis.
Economists have been expecting economic growth will slow in the fourth quarter as companies slow the pace at which they re-stock their shelves, but the data on spending suggests consumers are offsetting some of that drag.