Americans cut back on their spending in October by the largest amount since the Sept. 11, 2001, attacks. Meanwhile, orders to U.S. factories for big-ticket manufactured goods plunged by the largest amount in two years.
The Commerce Department reported Wednesday that consumer spending plunged by 1 percent last month, even worse than the 0.9 percent decline that had been expected. Personal incomes were up 0.3 percent last month, slightly better than the 0.1 percent gain analysts had expected.
The big decline in spending in October underscored concerns that the economy is falling into a deep recession. Consumer spending accounts for two-thirds of total economic activity.
Manufacturing continued to be battered by the overall economic weakness. The Commerce Department reported that orders for durable goods dropped by 6.2 percent last month, more than double the 3 percent decline economists expected.
The report showed widespread declines throughout manufacturing, led by decreases in autos and airplanes.
In a separate report from the Labor Department, new jobless claims fell more than expected last week from a 16-year high, the government said Wednesday, though they remain at elevated levels due to the slowing economy.
Initial requests for unemployment benefits fell to a seasonally adjusted 529,000 from the previous week's upwardly revised figure of 543,000. That is lower than analysts' expectations of 537,000.
Despite the improved number, initial claims remain at recessionary levels. The four-week average, which smooths out fluctuations, rose to 518,000, its highest level since January 1983, when the economy was emerging from a steep recession.
The number of people continuing to claim unemployment insurance also dropped unexpectedly to 3.96 million, down from the previous week's 4.02 million, which was the highest level in 25 years. The labor market has grown by about half since 1983.
And, in other sign of a weak housing sector, sales of new homes fell in October to the lowest point in nearly 18 years while the median price of a new home dropped to the lowest level since 2004.
The Commerce Department reported that new home sales decreased 5.3 percent last month to a seasonally adjusted annual sales pace of 433,000 homes, the lowest level since January 1991, another period when the country was undergoing a steep housing downturn.
The median price of a new home sold in October fell to $218,000, down 7 percent from a year ago. It was the lowest median sales price since September 2004.
The drop in new home sales was bigger than analysts had expected and left sales 40.1 percent below where they were a year ago.
From The Associated Press
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