US Economy Showing More Signs of Weakness
The U.S. economy is continuing to show weakness in everything from personal spending and income to construction spending, according to several reports out Friday.
The reports come as several Fed officials, including Chairman Ben Bernanke, are signaling that the Federal Reserve may be open to cutting interest rates further because of the slowing economy.
U.S. personal spending edged up a smaller-than-expected 0.2 percent in October while prices rose at a modest pace, Commerce Department data showed, heightening concerns about the health of the U.S. consumer.
Personal income grew at a 0.2 percent annual rate in October, below the 0.4 percent reading in September.
Economists polled by Reuters had expected a 0.3 percent gain in spending, and a 0.4 percent increase in personal income.
The personal consumption expenditure price index, a key measure of inflation, rose 0.3 percent. Core PCE prices, which strip out food and energy items, rose at a 0.2 percent rate, matching economists' expectations.
The report comes as economists and investors worry that the triple-blow of a weak housing market, tightening credit terms and high energy prices will curb consumer spending, which is the driving force behind the U.S. economy.
In a separate report, construction spending tumbled by a more-than-expected 0.8 percent, driven by a huge decline in private home building as the housing market crumbled further, the Commerce Department said.
Economists polled by Reuters before the report were expecting spending in October to fall by a much smaller 0.2 percent. October's decline to a $1.158 trillion seasonally adjusted annual rate -- the lowest rate in two years -- came after a revised 0.2 percent rise in September, first estimated as a 0.3 percent gain.
Private home building fell 2 percent in October to $503.7 billion, a rate not seen in four years. It was the 20th straight monthly decline since a peak in home building in February 2006.
Adding to the dismal picture, private nonresidential building fell 0.5 percent in October. It was the first decline since September of last year.
Meanwhile, business activity in the U.S. Midwest returned to expansion in November and grew at a faster rate than expected, a report showed.
The National Association of Purchasing Management-Chicago business barometer rose to 52.9 from 49.7 in October. Economists surveyed by Reuters had forecast the index at 50.3.
A reading above 50 indicates expansion.
The employment component of the index rose to 54.4 from 49.5 in October. Prices paid rose to 76.2 from 74.7 and new orders were unchanged at 53.9.