Incomes in the United States are up, but new home sales are down, continuing a pattern of mixed economic data indicating a tentative and fragile recovery from a prolonged and deep recession.
First the good news: U.S. personal incomes rose last month at the fastest pace in half a year. The Commerce Department says a $16 billion rise in wages and salaries translated into a point-four percent boost in incomes. That, in turn, helped propel spending, which rose .5 percent in November.
"When we look at all the indicators, we think that consumers are in a much better place [financially] than they were a year ago, and these sorts of numbers confirm that," says PNC Financial Services Group senior economist Craig Thomas.
Consumer spending accounts for more than two-thirds of U.S. economic activity. After slashing spending to weather the longest recession of the post-World War II era, Americans are beginning to open their wallets again, according to Barclays Capital economist Michelle Myer, who spoke on Bloomberg Television.
"Consumers cut back on spending during the recession, during that [financial] shock period. And now they are slowly starting to return. They are doing so in a conservative manner in that they are still looking for discounts out there [bargain hunting]. I think there is a lot of pent-up demand, and as the economy continues to recover, consumer spending should increase, as well," she said.
One thing Americans are not stampeding to buy: newly-constructed homes. Although sales of existing homes were up according to the latest data, new home sales fell more than 11 percent in November to the lowest level since April. The median sales price fell nearly two percent from a year ago. Economist Michelle Myer says the U.S. housing market continues to be plagued by mortgage delinquencies and rising inventories of unsold homes.
"We are looking for a large wave of foreclosures over the next several years. There are a lot of homes, distressed properties [with owners in financial trouble] that are going to enter the market and add to inventory," said Myer.
In corporate news, America's second-largest carmaker, Ford, says it has reached an agreement to sell its Volvo unit to privately-held Chinese automaker Geely Group, with a final deal expected next year. Ford acquired the Swedish carmaker in 1999. During the past year, Ford has been looking to sell Volvo to raise cash and focus on its core brands. Ford has already sold off two British units: Jaguar and Land Rover.