Consumer gauges, key index climb in November

WASHINGTON -- Consumers' spending and incomes posted solid gains in November, giving retailers hopes for decent Christmas sales, while a key economic forecasting gauge flashed encouraging signals for 2006.

The Commerce Department reported yesterday that personal spending rose 0.3 percent in November and was up an even bigger 0.7 percent when inflation was removed. It was the best inflation-adjusted showing since July, when spending surged as consumers responded to attractive auto sales incentives.

Incomes last month increased a solid 0.3 percent, reflecting the fact that the economy created 215,000 jobs in November after two months in which thousands of jobs were lost along the hurricane-ravaged Gulf Coast.

In a further bounce-back from the hurricanes, the Conference Board reported that its index of leading economic indicators rose a healthy 0.5 percent.

The November gain followed an even bigger 1 percent rise in October as both months showed strength after a big slide in September related to the hurricanes.

Analysts said the strength shown in the various statistics supported their view that retailers should enjoy a good but not great Christmas season with sales expected to rise by around 6 percent compared to 2004.

In a sign that inflation is remaining under control, a price gauge tied to consumer purchases fell by a record 0.4 percent last month, reflecting a rollback in energy costs. Inflation outside of food and energy was up just 1.8 percent in November, compared to a year ago, the smallest year-over-year increase since March 2004.

''This is just more evidence that we have got pretty solid growth and very little inflation," said Nariman Behravesh, chief economist at Global Insight, a Lexington, Mass., forecasting firm.

Behravesh said economic growth for all of 2006 would probably come in around 3.5 percent, little changed from the 3.7 percent he is expecting for 2005.

Mark Zandi, chief economist at Moody's Economy.com, said even though growth next year will be close to the 2005 pace, Americans may not feel as prosperous. ''Next year won't feel quite as good because inflation will be a tad higher, interest rates will be higher, and the housing market, which has been going gangbusters, will weaken a bit," he said.

In another report yesterday, the Labor Department said that 318,000 newly laid-off workers filed claims for unemployment benefits last week, down by 13,000 from the previous week.