WASHINGTON - Consumers put aside worries about slumping home sales and soaring gasoline prices and headed to the malls in November, pushing spending up by the largest amount in 31/2 years, according to a government report issued yesterday.
The better-than-expected surge lessened fears of an imminent recession and helped drive up stock prices.
The Commerce Department report showed that consumer spending shot up 1.1 percent last month, nearly triple the October gain. It was the biggest one-month jump since a 1.2 percent rise in May 2004 and was significantly higher than the 0.7 percent gain analysts had expected.
Personal incomes also were up last month, though by a far more modest 0.4 percent. Consequently, the personal savings rate dipped back into negative territory as households spent savings and borrowed to finance their November purchases.
Analysts attributed part of the spending to discounting and longer store hours at the start of the holiday season by retailers worried that the Christmas shopping period may not be strong this year given the factors weighing on the economy.
Still, the strong November spending relieved some concerns of a looming recession.
"Consumers did their part in November, but we will see whether they are up to it for the full Christmas season and into next year," said Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pa. "Their financial firepower is fading due to the weaker job market; surging gasoline and food prices, which cut into their purchasing power; and the evaporating housing market."
Consumer spending is closely watched because it accounts for two-thirds of the nation's economic activity.