Fresh unemployment benefit claims dropped last week to the lowest levels in the past two years, while consumer expenditure increased during October, suggesting some growth in economic activity.
However, last month also witnessed a sudden decrease in long-use goods, which may indicate that economic growth would keep being slow. Furthermore, an already low inflation dropped even more.
The drop in jobless claims is the lowest since June 2008, of only 407,000, lower by 34,000. This evolution was more optimistic than analysts’ forecast of a drop to 435,000.
Consumer spending increased by 0.4 percent last month, which makes October the fourth consecutive month showing growth, after a 0.3 percent rise in September. October evolutions in consumer spending fall slightly below analysts’ expectations of 0.5 percent.
Consumer spending is a highly important indicator, as it makes up for about 70 percent of the economic activity in the US.
BTIG chief market strategist Michael O’Rourke said that there is a need of approximately 150,000 new jobs per month in order to bring down US unemployment.
Despite positive signs, the consumer spending levels are still not vigorous enough.
Amid rising concerns about low inflation and sluggish growth of the economy, the Federal Reserve decided to inject money into the US economy by purchasing 600 billion worth of public debt. The action aims at driving interest rates lower than their already low levels and enhancing domestic demand.
Slow economic recovery is visible in the decrease by 3.3 percent in orders of long-term goods, the highest drop since the beginning of 2009. Analysts expected orders to stay at the same level as September, when they had a 5 percent surge. The fall in orders was accompanied by decreases in orders of machinery, defense aircraft, computers and communications equipment. Goods not related to the defense industry, excluding aircraft, dropped 4.5 percent last month, while analysts hoped for a 1 percent increase.
