Consumers shrug off fiscal cliff as spending rises

Consumers are not so worried about the fiscal cliff and political uncertainty in Washington that they are staying away from stores.

The Commerce Department reported Friday that consumer spending rebounded in November, up 0.6 percent after falling 0.2 percent in October. It was the biggest monthly increase in more than three years. Increased spending in the weeks after Hurricane Sandy struck the East Coast helped drive the results, as did higher personal incomes last month. “People may be cautious, but it’s not really showing up in holiday sales — not that much,” said Chris G. Christopher, an economist at IHS Global Insight, a Lexington forecasting firm. “They’re not as strong as last year, but these are still strong numbers.”

IHS Global Insight predicts that holiday sales for this year will increase 3.9 percent; last year holiday spending was 5.5 percent over 2010, Christopher said.


Falling pump prices, an improving housing market, and a national economy that has been adding jobs — albeit very slowly — have also convinced consumers to open their wallets. Scott Hoyt, senior director of consumer economics at Moody’s Analytics, described the level of consumer spending as moderate, but predicts it will rise if and when Congress resolves the impasse over tax increases and spending cuts.

Although the jobless rate has been declining slowly, it remains high, at 7.7 percent in November. Meanwhile the University of Michigan’s consumer sentiment index for December showed a sharp decline in December, to 72.9 from 82.7 in the prior month, which was a five-year high. “Consumers want to spend, there’s a lot of pent up demand, but they’re also concerned about the fiscal cliff,” Hoyt said.

Material from the Associated Press was used in this report. Megan Woolhouse can be reached at