By Timothy R. Homan Dec. 23 (Bloomberg) -- Spending by U.S. consumers increased in November less than anticipated as Americans cut back on services after buying more autos and electronics. The 0.5 percent increase in purchases was the sixth gain in the past seven months and followed a 0.6 percent increase in October, Commerce Department figures showed today in Washington. The report also showed incomes climbed 0.4 percent, the biggest increase since May, and inflation cooled. Retailers such as Best Buy Co. are cutting prices on some items to help households overcome the worst employment slump in the post-World War II era and mounting foreclosures. Shortfalls in spending, which accounts for 70 percent of the economy, indicate the recovery will take time to gain speed. “Consumer panic ended in December of last year,” said Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado, who accurately forecast the increase in purchases. “Consumers will have little influence on growth from here.” Stock-index futures trimmed earlier gains following the smaller-than-forecast increase in spending, while Treasury securities rose on the smaller than anticipated inflation readings. The contract on the Standard & Poor’s 500 Index climbed 0.3 percent to 1,116.5 at 9:09 a.m. in New York. The yield on the benchmark 10-year note fell to 3.72 percent from 3.76 percent late yesterday. Less Than Forecast The median estimate of 72 economists surveyed called for a 0.7 percent increase in spending, matching an originally reported gain of 0.7 percent the prior month. Projections ranged from gains 0.4 percent to 0.9 percent. The gain in incomes followed a 0.3 percent increase in October. Wages and salaries grew 0.3 last month, the biggest gain since April. Today’s report showed prices were stabilizing, reflecting discounting by retailers. The Federal Reserve’s preferred price measure, which is tied to spending patterns and excludes food and fuel, was unchanged in November from the previous month, the first time it didn’t increase this year. The gauge was up 1.4 percent from a year earlier, the same as in October. Prices overall climbed 0.2 percent after increasing 0.3 percent in October. Adjusted for inflation, spending climbed 0.2 percent following a 0.4 percent rise the prior month, restrained by a decline in purchases of services. Savings Rate The increases in spending and incomes left the savings rate at 4.7 percent in November, unchanged from the prior month. Inflation-adjusted spending on durable goods, such as autos, furniture, and other long-lasting items, climbed 1.2 percent last month. Purchases of non-durable goods increased 0.6 percent, and spending on services, which account for almost 60 percent of all outlays, fell 0.1 percent. Best Buy, the largest U.S. electronics retailer, is promoting notebook computers and $299 flat-screen televisions to lure consumers. As a result, the Richfield, Minnesota-based company will see its gross margin decline by as much as 1 percentage point in the fourth quarter, Chief Executive Officer Brian Dunn said on a Dec. 15 conference call with analysts. The labor markets and tight credit remain a hurdles. The jobless rate is projected to exceed 10 percent through the first half of next year. Payrolls fell by 11,000 last month, bringing total job losses to 7.2 million since the recession began in December 2007, the most of any contraction since the Great Depression. Retailers may lose almost $9 billion in holiday sales as banks rein in lending to cash-strapped consumers before a new credit-card law takes effect, according to Britt Beemer, chairman of consumer polling firm America’s Research Group. Sales in November and December may fall 1.2 percent to from the same period in 2008, said Beemer in a Dec. 21 interview. If lenders weren’t cutting customer spending limits and rejecting more credit-card applicants, sales would gain about 0.8 percent to $445.5 billion, he said. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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