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Consumer Spending Grows Less Than Expected

Consumer spending in the U.S. grew less than forecast in the third quarter, underscoring why Federal Reserve policy makers are zeroing in on fighting unemployment to spur the world’s largest economy.

Household spending climbed at a 1.4 percent rate, the smallest gain in more than a year and down from a previously reported 2 percent advance, revised figures from the Commerce Department showed today in Washington. Gains in inventories and a smaller trade deficit more than offset the slowdown to propel gross domestic product to a 2.7 percent rate, exceeding the 2 percent pace previously reported.

“The economy is moving forward at a moderate pace,” saidChris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. “The pace of consumer spending was disappointing, but it seems less worrisome given that some other sectors of the economy are doing better, like housing.”

Fed policy makers such as William Dudley say joblessness remains too high as central bankers consider whether they need to step up record stimulus heading into the so-called fiscal cliff of tax increases and spending cuts that may take effect next year if lawmakers fail to reach a compromise. At the same time, another report today reinforced signs of a rebound in housing that is helping underpin consumer confidence.”

 

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