WASHINGTON - Consumer spending fell for a fifth straight month in November, the longest weak stretch in a half-century, while incomes declined under the weight of massive layoffs. Economists don't think the hard times will end anytime soon.
The Commerce Department reported yesterday that consumer spending fell 0.6 percent last month, slightly less than the 0.7 percent drop economists had expected.
The November drop marked the fifth straight month of decreased spending, the longest stretch of declines in government records that go back to 1959. Economists say they think the weakness in consumer spending will continue, given the multitude of problems facing the economy.
The 0.6 percent drop in consumer spending followed an even larger 1 percent fall in October. But the steep plunge in gasoline prices, which is good news for consumers, made the declines look worse. Excluding price changes, consumer spending would have dropped 0.5 percent in October and risen 0.6 percent in November. The November increase excluding inflation was the best showing in more than three years.
Analysts attributed the rebound in inflation-adjusted spending to the huge plunge in gasoline and aggressive discounting by retailers trying to salvage the holiday shopping season. But they viewed it as a temporary blip and not the start of a sustained recovery for the consumer sector.
Brian Bethune, an economist at IHS Global Insight Inc., predicted that consumer spending, which accounts for two-thirds of the total economy, would probably fall at an annual rate of 2.5 percent to 3 percent in the current quarter, following a 3.8 percent drop in spending in the third quarter, a decline that had been the biggest in 28 years.
The country is mired in the longest recession in a quarter-century and facing a financial crisis that has cut off credit for millions of borrowers.
Job layoffs are also accelerating. A separate report yesterday showed that the number of newly laid off workers filing claims for unemployment benefits rose to 586,000 last week, up by 30,000 from the previous week, a much bigger increase than analysts had expected.
The personal-spending reports showed that Americans' incomes fell a worse-than-expected 0.2 percent in November. It was the first decline since July and reflected, in part, the fact that more than a half-million jobs were cut in November as the recession deepened.
All of the economy's troubles have left retailers braced for what could be their worst holiday shopping season in decades.
The government reported Tuesday that the overall economy, as measured by gross domestic product, was declining at an annual rate of 0.5 percent in the July-to-September quarter, and analysts say they believe the contraction will accelerate in the current quarter. Some are forecasting that GDP will plunge at an annual rate of 6 percent in the current quarter, which would be the worst showing in 26 years.
Many analysts say they think GDP will also fall in the first and second quarters next year before beginning a modest rebound in the summer. If that forecast turns out to be accurate, the current recession, which began in December 2007, will be the longest since World War II.