Consumer Prices Rise in Japan, Suggesting Stronger Growth

TOKYO — Japan’s economy is gaining momentum, data for October showed, with consumer prices excluding food and energy rising 0.3 percent from a year earlier. It was the biggest gain since 1998, but household spending remained tepid as incomes slipped from the same month a year before.

The various indicators released on Friday suggested that the very loose monetary policy and stimulus strategy of Prime Minister Shinzo Abe are helping end Japan’s long bout of deflation.

Industrial output rose 0.5 percent in October, the second monthly advance, driven by increases in the production of machinery used to make computer chips and other industrial products, plastics and cellphones.

The government reported that the core consumer price index, excluding food costs, rose 0.9 percent from the year before. Including both food and energy, prices rose 1.1 percent.

Japan’s jobless rate remained flat in October, though the number of jobs available rose slightly.

Further improvement is expected in November, aided by strength in housing construction and exports.

“Business conditions in the Japanese manufacturing economy improved for the ninth consecutive month and at a rapid pace in November, driven for the most part by an expansion of both foreign and domestic demand,” said Claudia Tillbrooke, an economist at Markit, who compiles its purchasing manager’s index for Japan. That index rose to 55.1 in November, from 54.2 in October. A reading above 50 suggests expansion.

The government and central bank have set a target for attaining a 2 percent inflation rate within two years. So far, economists say, most of the increase in prices has come from a weakening in the Japanese yen, which erodes consumer spending power and increases costs in yen terms for imports of fuel, food and industrial components.

Overall household spending, which accounts for nearly two-thirds of Japan’s economic activity, rose 0.9 percent in October. Excluding housing costs, spending fell 1.5 percent from the month before and 0.3 percent from September. Workers’ incomes fell an average of 1.3 percent in October.

Consumer Safety Chief Leaves a Small Agency With Bigger Powers

By the end of her four-year term, which came to a close on Friday, she can say that she has presided over a significant increase of the agency’s powers. And Ms. Tenenbaum, 62, has not been shy about using them. The agency recently leveled its highest fine ever — $3.9 million — against Ross, the discount retailer, because it continued to sell what the commission said was defective children’s clothing, even after warnings from the agency.

She and the safety commission also waded into one of the most contentious topics in the sports world: protecting football players from head injuries. The result was the Youth Football Brain Safety initiative, which called for the replacement of youth league helmets with safer models paid for by the National Football League, the National Collegiate Athletic Association and the N.F.L. Players Association.

“I just felt like it was something that needed to be done,” she said.

But before she could make much headway on issues, Ms. Tenenbaum had to persuade consumer advocates that she would work for them while reassuring manufacturers that the agency would not be unfair in carrying out its new powers. It was a difficult juggling act that some industry officials say Ms. Tenenbaum has managed to pull off.

“What I was most glad about is that she treated us and others in the industry as a resource, rather than the enemy,” said Carter Keithly, president of the Toy Industry Association. “We didn’t agree on everything, but she was always fair.”

For the Youth Football Brain Safety initiative, the N.C.A.A., the N.F.L. and the players association kicked in a total of $1 million to pay for the helmet replacements. “The support of Chairman Tenenbaum and the C.P.S.C. played an important role in making our helmet replacement initiative a reality,” Roger Goodell, the N.F.L. commissioner, said in a statement. “We really appreciated her personal involvement and the agency’s in the work to make our game better and safer.”

Yet the commission under Ms. Tenenbaum’s leadership has not been exempt from criticism. Some of the biggest complaints followed the decision by agency lawyers to hold Craig Zucker, the chief executive of the company that made Buckyballs, liable for the recall of the magnetic children’s toy, even after the company was dissolved. Manufacturers have argued that holding an individual responsible for a widespread, and expensive, recall sets a disturbing example, and would discourage companies from being open in their dealings with regulatory bodies.

Ms. Tenenbaum said she could not comment on the case because it was continuing.

The Consumer Product Safety Commission, one of the smallest agencies in government, was created in 1972. With a budget of about $120 million and 530 employees, the agency annually monitors more than 15,000 imported and domestically made products. Before Ms. Tenenbaum took the reins, it had been increasingly criticized in the light of deaths and injuries that critics said were the result of the agency being too close to the industries it regulated.

Ms. Tenenbaum, a lawyer, had no product safety experience when she was nominated for the job by President Obama. She had come up through the Democratic ranks in South Carolina, a state dominated by Republicans, serving as a legislative staff member as well as the state’s superintendent of education. In 1994, she ran an unsuccessful primary campaign for lieutenant governor, and 10 years later lost to Jim DeMint, a Republican, in the race to replace Ernest Hollings, a Democrat who was retiring, in the Senate.

Before her arrival at the safety commission, the Bush administration had sought to ease what it considered costly rules that placed unnecessary burdens on businesses, and the agency’s budget was largely gutted. Staff was cut and safety initiatives were stalled or dropped.

In 2007, a Washington Post investigation found that Nancy Nord, who was then the agency’s acting chairwoman, and her predecessor, Hal Stratton, had taken dozens of industry-sponsored trips that were paid for in full or in part by trade associations or manufacturers of products that were regulated by the agency. Ms. Nord said the trips were legal.

U.S. Consumer Spending Rises as Wages Lift Family Income

American families spent 0.3 percent more last month than the month before, which was in line with expectations, Commerce Department data showed on Friday.

Higher wages drove incomes up 0.4 percent, the most since February. Analysts said the increase could drive faster spending in the months ahead.

Rising wages and spending also appeared to give businesses a little more leverage to raise prices, with inflation outside food and energy picking up in August. That could bolster the case for the U.S. Federal Reserve to move forward with winding down a bond-buying stimulus program.

"This acceleration in core inflation will likely be encouraging to the Fed," said Millan Mulraine, an economist at TD Securities in New York.

The data backs the view that tax hikes and federal budget cuts are dragging on the economy less as the year goes on. Washington increased tax rates in January and slashed the federal budget in March.

But Wall Street and the Fed have appeared increasingly concerned that political gridlock in Washington could trigger a government shutdown next week and perhaps a debt default after mid-October, either of which could deliver blows to the economy.

Worries about the future are also rising among families.

U.S. consumer sentiment slid in September to its lowest level in five months as Americans saw higher interest rates and sluggish economic growth ahead, according to the final reading of the Thomson Reuters/University of Michigan's consumer survey.

The data had little impact on sentiment among investors, who remain preoccupied with the potential for fiscal crises. U.S. stocks fell and the dollar closed in on a seven-month low.

SOME BRIGHT SIGNS

The data from last month, however, was modestly upbeat.

Even after taking into account tax bills and price increases, incomes rose in August by the most since March.

"The pick-up in income growth in August suggests that consumption growth may even accelerate in the fourth quarter," said Paul Ashworth, an economist at Capital Economics in Toronto.

Indeed, the recent gains in consumer spending, while still modest, appear to have stopped a worrisome cooling of inflation.

Economists warn that if inflation runs too low an economic shock could tip the economy into a spiral of falling prices and wages.

Core prices, stripping out volatile food and energy prices, rose 0.2 percent in August, up from a 0.1 percent gain in July, according to the Fed's favored gauge.

Analysts pointed out that annualized readings for core inflation over the past few months now appear to be trending higher, suggesting a turning point may have been reached.

Still, annual inflation is lower than it was at the start of the year, according to both headline and core measures. These both came in at 1.2 percent in August, well below the Fed's 2 percent target.

(Reporting by Jason Lange; Additional reporting by Luciana Lopez in New York; Editing by Krista Hughes)

Consumer Spending Rose Slightly in August

Consumers’ spending on goods and services rose 0.3 percent in August, the Commerce Department said on Friday. That is up from a 0.2 percent gain in July, which was slightly more than the 0.1 percent reported last month.

Income rose 0.4 percent in August, the best gain since February and up from a 0.2 percent July increase. Private wages and salaries rose 0.5 percent, while the government wages and salaries rose 0.2 percent.

The government figures would have been higher if not for forced federal furloughs that reduced wages and salaries by $7.3 billion.

Consumer spending drives 70 percent of economic activity. Many analysts say the increases are not enough to accelerate economic growth in the third quarter from the 2.5 percent annual rate in the April-June quarter.

“With more money coming in, consumers spent a little, just a little, more freely,” said Jennifer Lee, senior economist at BMO Capital Markets.

Americans grew more pessimistic this month about the economy, their own finances and government budget policies, according to a survey of consumer confidence released Friday.

The University of Michigan says its final reading of consumer sentiment dropped to 77.5 in September from 82.1 in August. It was the second straight decline after confidence reached a six-year high of 85.1 in July.

Paul Ashworth, chief United States economist at Capital Economics, predicts the economy is growing at an annual rate of 2 to 2.5 percent in the July-September quarter. Still, the pickup in August spending could signal stronger growth in the final three months of the year.

But other economists are less hopeful. Peter Newland, an economist at Barclays, said that the modest increase did not change Barclays’ forecast for growth, at a 1.7 percent rate.

There are some signs that consumers may be better positioned to step up spending soon.

The number of people seeking unemployment benefits has sunk to its lowest point in six years because few companies are laying anyone off anymore. That has led some economists to predict that employers added 200,000 jobs or more jobs in September, the most since February.

Consumer Spending and Income Rose a Faint 0.1% in July

After rising 0.3 percent in June, income was held back in part by steep government spending cuts that reduced federal workers’ salaries. Overall wages and salaries tumbled $21.8 billion from June, with a third of the decline coming from forced furloughs of federal workers.

Consumers cut their spending on long-lasting manufactured goods, like cars and appliances. Overall spending had risen 0.6 percent in June.

The tepid gains suggested economic growth was off to a weak start for the quarter.

A measure of consumer confidence slipped this month from a six-year high in July, as Americans expressed less optimism about the coming months. Americans said they were less confident that the job market would improve, but more confident that their income would rise.

Consumer spending drives roughly 70 percent of economic activity. So the weak spending report led some economists to sound a more pessimistic note on growth in the current quarter.

“This is a disappointing report on a number of levels,” said James Marple, senior economist at TD Economics. “Prospects for a pickup in economic growth in the third quarter hinge on a broad-based acceleration in spending by households and business to offset the ongoing drag from government. The data for the first month of the quarter are not following this script.”

Several analysts said that economic growth was unlikely to match the 2.5 percent annual rate reported Thursday for the April-June quarter. That was more than twice the growth rate in the first quarter and far above an initial estimate of a 1.7 percent rate for April through June.

The Federal Reserve will consider the latest data at its September meeting, when it decides whether to begin pulling back on its stimulus efforts. The most critical factor the Fed will weigh is the August employment report, due out next Friday.

Another concern is that rising interest rates could dampen consumer spending, particularly on homes and cars. Mortgage rates have already risen more than a full percentage point since May.

The small rise in spending was driven by a 0.9 percent gain in purchases of nondurable goods, like clothing. Purchases of durable goods like cars fell 0.2 percent, while money spent on services like utilities and doctor’s visits was unchanged in July.

A price gauge tied to consumer spending was up 0.1 percent in July compared to June. Prices excluding volatile food and energy are up just 1.4 percent compared to a year ago, significantly below the Federal Reserve’s 2 percent target for inflation.

Consumer Spending Barely Rises; Inflation Is Benign

Spending, which accounts for more than two-thirds of U.S. economic activity, could struggle to regain momentum as other data on Friday showed consumer sentiment fell this month.

The reports added to a number of signs that have suggested a loss of steam in the economy early in the third quarter after a fairly sturdy performance in the April-June period even in the face of higher taxes and lower government spending.

"There has been a lot of optimism about the economy accelerating in the second half of the year as the fiscal drag waned. The latest data suggests that's not happening," said Michelle Girard, chief economist at RBS in Stamford, Connecticut.

The Commerce Department said consumer spending ticked up 0.1 percent, restrained by weak outlays on utilities and automobiles. Adjusted for inflation, spending was flat.

It is not likely to rebound anytime soon. A separate report showed the Thomson Reuters/University of Michigan's consumer sentiment index slipped to 82.1 in August from 85.1 in July.

The drop reflected concerns about higher borrowing costs. Long-term interest rates have risen more than a percentage point over the last three months in anticipation of the Fed scaling back its support for the economy.

"Less confident individuals don't become more active shoppers," said Joel Naroff, chief economist at Naroff Economic Advisers in Holland, Pennsylvania. "That does not bode well for growth."

U.S. financial markets were little moved by the data as investors kept a wary eye on developments in Syria. Stocks were trading lower, while U.S. Treasury debt prices were up. The dollar touched a four-week high against a basket of currencies.

With demand tepid, inflation pressures were subdued last month. A price index for consumer spending edged up 0.1 percent, slowing from a 0.4 percent rise in June.

Over the past 12 months, prices have risen only 1.4 percent. While that is the biggest increase since February, it is well below the Fed's 2 percent target.

Excluding food and energy, the price index for consumer spending nudged up 0.1 percent after advancing 0.2 percent in June. For the fourth month running, core prices were up just 1.2 percent from a year ago.

INFLATION BELOW TARGET

The lackluster spending and soft inflation data would argue against the U.S. central bank trimming the $85 billion in bond purchases it is making each month to keep interest rates low.

Many economists, however, believe the Fed will decide to begin tapering its buying, or quantitative easing, at its September 17-18 policy meeting.

"This does nothing to alter our view of tapering," said Eric Green, chief economist at TD Securities in New York. "Fear of unquantifiable financial risks within a QE regime that offers diminishing returns is driving the policy agenda, not strong growth and inflation."

The economy grew at a 2.5 percent annual pace in the second quarter, quickening from a 1.1 percent rate in the first three months of the year.

Economists said it was now unlikely that consumer spending this quarter would even match the second quarter's 1.8 percent growth pace. Wall Street banks such as Goldman Sachs, Barclays and RBS lowered their third-quarter GDP growth estimates by as much as half a percentage point to as low as a 1.5 percent rate.

Consumer spending continues to be constrained by sluggish wage growth. Income ticked up 0.1 percent in July after rising 0.3 percent in June.

Both private and government salaries fell last month. Furloughs at federal agencies as part of Washington's belt-tightening reduced salaries by $7.7 billion last month.

With spending matching income growth, the saving rate - the percentage of disposable income households are socking away - held at 4.4 percent.

(Reporting by Lucia Mutikani, additional reporting by Steven C Johnson in New York; Editing by Andrea Ricci)

Consumer Sentiment in the United States Slips

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment slipped to 82.1 in August from 85.1 in July.

The final result did manage to top an initial mid-month reading of 80.0 and beat economists' expectations for a final read of 80.5.

"Most of the late August gain was due to more favorable income expectations, with consumers expecting the largest income gains in nearly five years, although the median expected increase was just 0.9 percent, less than the expected rate of inflation," survey director Richard Curtin said in a statement.

However, households with incomes below $75,000 grew more pessimistic about the future, and all households expected higher interest rates over the next year and slightly slower growth.

That helped drive the gauge of consumer expectations down to 73.7 from 76.5. The survey's barometer of current economic conditions slipped to 95.2 from 98.6 in July.

Long-term interest rates have risen by more than a full percentage point over the last three months on the view that the Federal Reserve will start scaling back as soon as next month its hefty support for the economy.

That has pushed up mortgage rates. Economists fear consumer sentiment could weaken if higher interest rates start to slow momentum in a housing revival that has been one of the brightest spots in the overall U.S. recovery

The one-year inflation expectation fell to 3 percent from 3.1 percent while the five-to-10-year inflation outlook edged up to 2.9 percent from 2.8 percent.

(Reporting By Steven C. Johnson; Editing by Chizu Nomiyama)

Consumer Sentiment Rises to Highest Level in Six Years

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Consumer Sentiment Ended June Near a Six-Year High

Consumer sentiment improved, ending this month close to a six-year high set in May, as optimism among higher-income families rose to its strongest level in six years, a survey released on Friday showed.

The Thomson Reuters/University of Michigan’s final reading on the overall index on Americans’ consumer sentiment was 84.1 points, slightly below the 84.5 in May. The new figure was higher than the preliminary reading of 82.7.

Economists polled by Reuters had forecast the final June reading of 82.8.

“Consumers believe the recovery has achieved an upward momentum that will not be easily reversed,” Richard Curtin, survey director, said in a statement.

He added that the recent drop in stock prices and the jump in mortgage rates had not caused a deterioration in consumers’ view on the economy.

“To be sure, few high- or low-income consumers expect the economy to post robust gains or think the unemployment rate will drastically shrink during the year ahead,” Mr. Curtin said.

Consumer sentiment is considered by some economists as a predictor on consumer spending, which accounts for 70 percent of the United States economy.

Also on Friday, the Institute for Supply Management-Chicago said its index on Midwest business activity posted a steeper-than-expected drop in June to 51.6. A reading below 50 points suggests business contraction.

“It’s not firmly in expansion territory where businesses are ready to hire and invest,” said Tim Quinlan, an economist at Wells Fargo Securities in Charlotte, N.C.

In the Thomson Reuters/University of Michigan’s data, there was a divergence in outlook between higher-income families and lower-income ones.

Higher-income households showed increased optimism about their incomes and wealth, while lower-income ones reported less optimism. Families in the top third of incomes were the most optimistic since the June 2007 survey.

Consumer Sentiment and Factory Data Point to Moderate Growth

While other data on Friday showed wholesale prices jumped in May as gasoline and food prices rebounded, underlying inflation pressures were muted.

The reports come ahead of a Federal Reserve meeting next week where policymakers will discuss whether and when to start scaling back their $85 billion a month pace of bond buying.

Though the economy is showing resilience in the face of tighter fiscal policy in Washington, the pace of growth is unspectacular and inflation is well below the central bank's 2 percent target.

"The Fed is likely to maintain its current pace of securities purchases until later in the fall. There is no sign of inflation and growth is still moderate," said Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh.

The Thomson Reuters/University of Michigan's preliminary index on consumer sentiment fell to 82.7 in June after touching a near six-year high of 84.5 in May.

June's reading was the second highest in the last eight months, suggesting Americans were far from gloomy about their long-term prospects.

"The proximity of the headline index to cycle highs continues to suggest that consumer attitudes remain positive, a likely positive factor for future consumer spending," said Gennadiy Goldberg, an economist at TD Securities in New York.

DOMESTIC DEMAND HELPING FACTORIES

While households appear to be weathering tighter fiscal policy, helped in part by rising home prices, the factory sector has taken a beating from spending cuts. It has also suffered from a recession in Europe that is weighing on global growth.

In a separate report, the Fed said factory output edged up 0.1 percent last month after two back-to-back declines. Overall industrial production was unchanged, held back by a big drop in utilities output.

"The slight improvement in May suggests improving domestic demand is helping offset the negative impact on exports of recent softening in overseas demand," said Ted Wieseman, an economist at Morgan Stanley in New York.

Separately, the Labor Department said the producer price index, a gauge of prices received by the nation's farms, factories and refineries, rose 0.5 percent in May after declining 0.7 percent in April.

Excluding volatile food and energy costs, however, wholesale ticked up only 0.1 percent for a second straight month.

In the 12 months through May, this so-called core PPI advanced 1.7 percent, the same as in April and March. The overall PPI was also up 1.7 percent after rising 0.6 percent in the period through April.

U.S. financial markets were little moved by the reports, with attention shifting to the Fed's meeting on Tuesday and Wednesday. Stocks on Wall Street were trading lower, while prices for U.S. government debt rose. The dollar was little changed against a basket of currencies.

Wholesale gasoline prices increased 1.5 percent last after dropping 6.0 percent in April, boosting energy prices. Energy prices accounted for more than 60 percent of the rise in PPI last month.

A record jump in egg prices pushed up food prices by 0.6 percent. The cost of food had dropped 0.8 percent in April. Egg prices accounted for 60 percent of the rise in the wholesale food index last month.

An increase in light truck prices accounted for almost two-thirds of the rise in core PPI in May.

"Producers are complaining that they have been unable to pass any increases in energy or food prices along to consumers," said Diane Swonk, chief economist at Mesirow Financial in Chicago. "The result is an inflation rate that falls short of a healthy buffer zone for the overall economy."

(Reporting by Lucia Mutikani, Additional reporting by Paige Gance in Washington and Leah Schnurr in New York; Editing by Andrea Ricci, Tim Ahmann and Chizu Nomiyama)

Taiwan Tries to Regain Its Lead in Consumer Electronics

TAIPEI, Taiwan — Jonney Shih, the chairman of Asustek Computer, has epitomized the Taiwanese electronics engineer for a generation: a slender figure in rumpled, baggy trousers, he once helped Intel solve heat problems in its Pentium 4 microprocessors.

So it has been a surprise over the last several years to see Mr. Shih, now 60, reinvent himself with snug-cut Italian suits, innovative designs for tablet and notebook computers and scathing criticisms of Taiwan’s test-obsessed, engineering-oriented educational system.

“I don’t think the Taiwanese got very good training to drive the mentality of innovation,” he said during an interview at Asus’s headquarters here on the outskirts of Taipei. (Mr. Shih also demonstrated his flexibility in the interview, assuming the lotus position while wearing a dark blue Armani suit with a sky-blue Armani tie.)

Fostering innovation has become a mantra among corporate leaders and government officials alike in Taiwan this year because the island’s huge consumer electronics industry has run into serious trouble.

Worldwide sales of PCs, for which Taiwanese companies control over 90 percent of the final design and manufacturing, are declining steadily. Sales of smartphones, for which Taiwanese companies control less than a fifth of the market, are rising briskly. Tablets based on the Android operating system, which most Taiwanese companies, with the exception of Asus, have been slow to embrace, are also on the same upward trajectory.

“Outside of Asus, all the others are struggling,” said Helen Chiang, a Taiwan electronics specialist at the IDC research firm.

Foxconn and Acer have each reported that sales in the first quarter dropped 19 percent from a year ago. HTC’s sales plunged 37 percent, although that was partly because the company began shipping the annually improved version of its best-known smartphone in late March instead of February. At Quanta, a 70,000-employee contract designer and manufacturer of notebook computers, sales have shown double-digit percentage drops from year-earlier levels for 14 consecutive months.

Foreign rivals have proved more nimble. In South Korea, Samsung is expanding rapidly in smartphones, tablet computers and other sectors. After embracing the Android operating system early, the company has built on its huge economies of scale in the mass production of components, like display screens and microprocessors.

In China, Lenovo and many smaller manufacturers are relying on labor that, while no longer cheap, is still less expensive than in Taiwan. That helped make Lenovo the only one among the top five PC makers worldwide to eke out a gain in shipments in the first quarter — although by only a tenth of a percent.

And in the United States, Apple, Google and Amazon have shown themselves adept at producing breakthrough consumer products, while pending legislation would allow them to import more foreign engineers at a lower cost than hiring and training domestic engineers.

As notebooks and other Windows-based PCs have lost ground, first to Apple tablets and now to Android-based designs, even Microsoft has been indicating dissatisfaction with the pace of PC innovation in Taiwan. Despite a longtime aversion to hardware, Microsoft recently introduced its own Surface tablet.

“The Surface tablet is a pretty strong signal to the whole Taiwan PC ecosystem that they’re not innovating enough,” said Bill Whyman, a senior managing director at the ISI research firm.

One exception to Taiwan’s difficulties is Asus. Its many new Android-based tablets, including one that it has branded with Google, allowed it to surpass Amazon in the first quarter of this year to become the third-largest player in the global tablet computer market, behind Apple and Samsung, according to IDC.

And some of its designs are downright clever. One new model, the PadFone, lets the user slide a cellphone into the back, turning the tablet into an oversize cellphone. Another tablet, the Transformer, features a detachable keyboard with a wireless connection and a two-sided display panel that can show a movie on one side to entertain children or guests while the other side is a regular computer display for the owner.

Consumer Spending Rises, Indicating Sturdy Growth

The data on Friday also showed a rebound in income growth, putting the economy in a better shape to deal with tighter fiscal policy, particularly $85 billion in across-the-board federal government spending cuts, known as the "sequester."

"The economy is in a good place now in terms of momentum and strength, and it will need it as the government spending cuts will take something off growth as the year progresses," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.

Consumer spending increased 0.7 percent last month after a 0.4 percent rise in January, the Commerce Department said.

Though part of the increase in spending, which accounts for about 70 percent of U.S. economic activity, was because of higher gasoline prices, Americans also bought long-lasting goods such as automobiles and spent more on services.

Gas prices at the pump increased 35 cents a gallon last month.

After adjusting for inflation, spending was up 0.3 percent after advancing by the same margin in January. As a result, economists said consumer spending in the first quarter was on track to record its fastest growth pace since 2010.

"It appears that consumer spending actually accelerated in the first quarter despite the tax hikes implemented at the start of the year," said Daniel Silver, an economist at JPMorgan in New York.

Some economists bumped up their first-quarter economic growth estimates.

Barclays raised its gross domestic product forecast by 0.7 percentage point to 3.3 percent. Macroeconomic Advisers lifted their estimate by three-tenths of a point to 3.5 percent.

The economy grew at only a 0.4 percent annual pace in the fourth quarter.

A separate report showed households this month shrugged off the deep government spending cuts, focusing instead on a steady labor market improvement, which is starting to boost wages.

The Thomson Reuters/University of Michigan's index of consumer sentiment rose to 78.6 from 77.6 in February.

"Consumers have discounted the administration's warning that economic catastrophe would follow the reductions in federal spending, and consumers have renewed their expectation that gains in employment will accelerate through the rest of 2013," said survey director Richard Curtin.

And they have reason to be optimistic. Income increased a healthy 1.1 percent after tumbling 3.7 percent in January.

Personal income had increased sharply in December as businesses rushed to pay dividends and bonuses before tax hikes took effect this year. That also skewed income data for January.

U.S. financial markets were closed for Good Friday and will reopen on Monday.

LITTLE SIGN OF FISCAL DRAG

A 2 percent payroll tax cut expired on January 1 and tax rates for wealthy Americans also went up. The consumer spending and sentiment reports were the latest to show little sign the tighter fiscal policy has been a major drag on the economy.

Employment growth gained steam in February, factory activity touched a 1-1/2 year high and first-time filings for jobless benefits have only increased modestly so far in March.

Last month, the income at the disposal of households after inflation and taxes increased 0.7 percent after dropping 4 percent in January.

With income growth outpacing spending, the saving rate - the percentage of disposable income households are socking away - rose to 2.6 percent from 2.2 percent in January.

The higher gasoline prices pushed up inflation, with a price index for consumer spending rising 0.4 percent after being flat for two straight months. February's increase in the PCE index was the largest since August.

But a core reading that strips out food and energy costs rose only 0.1 percent after increasing 0.2 percent in January, showing no sign of underlying inflation pressures.

Over the past 12 months, inflation has risen 1.3 percent after a similar gain in the period through January.

Core prices were up 1.3 percent, well below the Federal Reserve's 2 percent target. They also had risen 1.3 percent in the 12 months through January.

The benign inflation picture should give the U.S. central bank room to continue with its monetary stimulus as it seeks to boost job growth.

The Fed said last week it would maintain its monthly $85 billion purchases of mortgage and Treasury bonds until it saw a substantial improvement in the job market.

"This is plenty of ammunition for all those Fed officials, who currently do not want to scale back the degree of monetary accommodation," said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.

"For investors this must look like Goldilocks: Better economic data and ongoing monetary accommodation at the same time."

(Reporting by Lucia Mutikani, additional reporting by Luciana Lopez in New York; Editing by Neil Stempleman)

Consumer Debt Increases on Car and School Loans

WASHINGTON (AP) — American consumers borrowed more in November to buy cars and attend school, but they stayed cautious about using their credit cards.

The Federal Reserve said Tuesday that consumers increased their borrowing in November by $16 billion from October to a seasonally adjusted record of $2.77 trillion.

Borrowing that covers autos and student loans increased $15.2 billion. A category that measures credit card debt rose just $817 million.

The sharp difference in the borrowing gains illustrates a broader trend that began after the recession. Four years ago, Americans carried $1.03 trillion in credit card debt, a high. In November, that figure was 16.5 percent lower.

At the same time, student loan debt has increased significantly. The category that includes auto and student loans is 22.8 percent higher than in July 2008. Many Americans who have lost jobs have gone back to school to get training for new careers.

The November increase also reflected further gains in auto sales, which rose 13.4 percent in 2012 to top 14 million units for the first time in five years. The need to replace vehicles lost to Hurricane Sandy in the Northeast may have also contributed to the gain.

Consumer spending rebounded in November, helped by lower gas prices and solid job growth that carried over into December. Employers added 155,000 jobs in December and 161,000 in November.

Steady hiring may have encouraged consumers to keep borrowing and spending, despite concerns about the sharp tax increases and government spending cuts that were scheduled to occur at on Jan. 1.

Still, some analysts expect borrowing and spending may have slowed in December as budget negotiations in Washington intensified. Congress and the White House did not reach a deal to avert sharp tax increases until Jan. 1. And they delayed tougher decisions about spending cuts for two more months.

Consumer confidence fell in both November and December, which may slow spending in December. Consumer spending drives about 70 percent of economic activity.

Media Decoder Blog: Arbitron Deal Extends Nielsen's Reach Into Consumer Habits

With its $1.26 billion acquisition of Arbitron, announced on Tuesday, Nielsen is buying much more than the most widely followed radio ratings service. It is also extending its already substantial reach into the overlapping forms of media through which people consume their entertainment and news, and spend their money — information that is essential to advertisers.

Nielsen is best known for its television ratings, but its various branches also track an array of consumer product sales, like books and music, as well as consumers’ habits online and through their mobile devices. Just on Monday, for example, Nielsen announced a new system with Twitter to rank TV shows by their levels of social-media chatter.

Arbitron, meanwhile, has remained primarily focused on radio consumption, which has held surprisingly strong in the Internet age as people stay plugged in to their favorite radio stations, particularly while driving.

According to Arbitron’s most recent statistics, more than 241 million people in the United States, or about 92 percent of the population ages 12 and over, listen to the radio each week. And unlike television, the vast majority of the ads on broadcast radio are for local businesses.

Through the deal with Arbitron, Nielsen should be able to track even more of consumers’ media consumption and buying habits. In a presentation to investors and Wall Street analysts, Nielsen said that by adding Arbitron’s radio data to its portfolio, it would be able to increase the total amount of time in a given day it could track the listening and viewing habits of the average American to seven hours from the current five.

“That is a very big deal when your job is to measure how consumers ultimately form and change behaviors,” David L. Calhoun, Nielsen’s chief executive, said in a conference call. “And it’s that linkage of buy and watch that ultimately allows us to provide those insights.”

In early trading, Arbitron’s shares shot up by nearly 24 percent, reflecting the premium Nielsen will pay for the shares; Nielsen’s stock was up about 1.3 percent. Nielsen is active in more than 100 countries and last year had $5.5 billion in revenue. Arbitron is a much smaller company, but has substantial profit margins; last year it generated $53 million in net income on $422 million in revenue.

As some analysts see it, the challenges for the combined companies will include measuring the growth of online audio and linking Arbitron’s value for local advertising with Nielsen’s more extensive and national data.

For now, Internet radio services like Pandora are not measured by Arbitron in “apples to apples” terms alongside broadcast radio stations, which Pandora has complained puts them at a disadvantage with advertisers and media-buying agencies. But those measurements may become essential as online listening grows and is embraced by even the biggest radio broadcasters, like Clear Channel Communications.

Laura Martin, an entertainment and media analyst with Needham & Company, said that Nielsen’s expertise and its aggressive push into online markets could be an advantage in exploiting Arbitron’s local radio data.

“It’s interesting that they will have the management I.Q. of Nielsen in charge of local advertising possibilities,” Ms. Martin said. “The Internet is moving at the speed of light, and the next big promise of advertising cash is sitting in local. In Nielsen’s hands those relationships may turn into something that Arbitron didn’t think of.”

Ben Sisario writes about the music industry. Follow @sisario on Twitter.

Consumer Prices Fall 0.3% on Lower Gas Costs

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Consumer Spending Rose 0.8% in September

WASHINGTON (AP) — Americans increased their spending in September at twice the rate that their income grew, a sign of confidence in the economy. Still, consumers made up the difference by saving less for a third consecutive month, a troubling trend.

The Commerce Department said Monday that consumer spending increased 0.8 percent in September from August. That came after a 0.5 percent gain in August and was the best showing since February.

Personal income rose 0.4 percent, an improvement from a slight 0.1 percent gain in August and the best gain since March. But after adjusting for inflation and taxes, income was flat in September. That came after a 0.3 percent decline in August.

Consumer spending is important because it drives nearly 70 percent of economic activity.

A pickup in consumer spending helped lift economic growth in the July-September quarter, to a 2 percent annual rate. While that is faster than the 1.3 percent rate in the April-June period, it’s still too weak to create enough jobs to rapidly lower the unemployment rate.

Paul Dales, senior United States economist at Capital Economics, said weak income growth would most likely hold back spending in the coming months. Consumers can cut their savings by only so much, he cautioned. And if Congress fails to reach a budget deal by the end of the year, taxes will rise in January. That could also reduce consumer spending.

The spending gain in September reflected in part rising consumer confidence. The University of Michigan reported on Friday that its final consumer sentiment index for October had hit a five-year high. Falling gas prices and a slightly better job market were credited with lifting consumers’ outlook.

Still, households trimmed their savings to finance the increase in purchases, Monday’s report showed. The savings rate dropped to 3.3 percent of after-tax incomes in September, down from 3.7 percent in August and 4.1 percent in July.

Americans also paid more for gas in September. That drove an inflation gauge tied to consumer spending up 0.4 percent last month. But excluding food and energy, prices rose just 0.1 percent. Gas prices have dropped since then, which could encourage more spending elsewhere.

Consumer Price Index Rises 0.6% on Surge in Gasoline

Other data showed only mild underlying inflation pressures, potentially giving the Federal Reserve room to keep interest rates low to boost the economy.

The U.S. economy has shown signs of faster growth in recent months but Tuesday's reports highlighted some of challenges faced by the economy.

"There are still a lot of global headwinds," said Jonathan Basile, an economist at Credit Suisse in New York.

The Fed said U.S. factory output rose only a modest 0.2 percent in September, which many analysts said was a sign the cooling global economy is weighing on American manufacturers.

The increase in output was not enough to make up for a sharp decline in August, and manufacturing production fell at a 0.9 percent annual rate in the third quarter.

The European debt crisis has been weighing on the global economy, denting demand for goods produced by manufacturers from China to the United States. U.S. exports fell 1 percent in August.

Also, business investment has recently cooled in the United States, putting another drag on factories. This is probably due to worries over the global economy and the possibility the U.S. government could cut spending and raise taxes next year.

"At a time when the economy needs all the help it can get, business spending is stalling," Wells Fargo said in a research note.

MILD CORE

U.S. stocks traded higher on Tuesday as strong earnings from key companies soothed fears about the global economy, while yields on Treasury debt rose.

In a separate report, the Labor Department said a surge in the cost of gasoline pushed the country's Consumer Price Index up 0.6 percent in September.

Higher costs at the pump force many American consumers to cut back on other spending, although retail sales data for September released on Monday pointed to a pick-up in consumer spending despite higher fuel costs.

The government said weekly earnings for workers were flat in September when adjusting for inflation.

Crude oil and gasoline prices rose over the summer as the United States and its allies raised pressure on Iran over its nuclear program. Prices for gasoline have comes down slightly in recent weeks, which could ease pressure on consumers this month.

The inflation report also showed that prices outside food and energy - seen as a barometer of inflation trends - rose only 0.1 percent in September for the third straight month.

"The Fed can confidently focus on propping up the economy because inflation is not a problem," said Cary Leahey, an economist at Decision Economics in New York.

The Fed said last month it would buy $40 billion in mortgage-backed securities every month until the jobs outlook improves substantially.

Another report suggested the Fed's stimulus plan was gaining traction in the housing sector. Home-builder sentiment rose to a fresh six-year high in October, the National Association of Home Builders said.

In the 12 months to September, overall consumer prices increased 2 percent, the fastest pace since April and up from 1.7 percent in August. Core prices also rose 2 percent in the year through September, up a tenth of a point from August's reading.

While most economists don't see inflation threatening the U.S. economy, some believe the Fed would tolerate prices rising faster than the central bank's 2 percent target over the shorter term to allow stronger economic growth as the country recovers from the 2007-09 recession.

Allowing this view to blossom, the Fed said in September it would keep interest rates low for a long time even after the economy strengthens.

"Core inflation was low and unthreatening (in September), but in truth neither matters to a Fed monetary policy committed to lowering unemployment," said Joseph Trevisani, a market strategist at Worldwide Markets in Woodcliff Lake, New Jersey.

(Additional reporting by Alister Bull in Washington and by Ryan Vlastelica and Richard Leong in New York; Editing by Andrea Ricci)

U.S. Consumer Sentiment Jumps to a 5-Year High

The Thomson Reuters/University of Michigan’s preliminary October reading on the overall index on consumer sentiment came in at 83.1, up from 78.3 in September, and the highest since September 2007, the survey showed on Friday.

The new buoyancy among consumers comes shortly after the nation’s unemployment rate tumbled in September to its lowest in nearly four years.

“We are getting some quite interesting signals from consumer sentiment and employment data,” said David Sloan, an economist at 4Cast in New York.

The sentiment reading was well above the median forecast for a decline to 78 among economists surveyed by Reuters as consumers felt better about the economy.

The compilers of the survey said consumers felt better about the economy in both the long and the short term.

“What changed was how they evaluated economic conditions,” the survey director, Richard T. Curtin, said in a statement. “Economic conditions during the year ahead were expected to be ‘good’ by more consumers, and more consumers expected ‘good’ economic times over the next five years.”

The survey’s gauge of consumer expectations jumped to 79.5 from 73.5, well above an expected reading of 74. Expectations were at their highest since July 2007.

The survey’s barometer of current economic conditions rose to 88.6 from 85.7 and was above a forecast of 86.

Also on Friday, the Economic Cycle Research Institute, a New York-based independent forecasting group, said its measure of future economic expansion pushed higher last week, while the annualized growth rate rose to its loftiest in more than a year.

The institute said its Weekly Leading Index increased to 127.7 last week from a revised 126.2 the previous week. The index’s annualized growth rate accelerated to its highest level since May 2011, at 5.7 percent from 4.6 percent.

A separate report showed producer prices rose more than expected in September as the cost of gasoline surged, but underlying inflation pressures were muted in a sign the Federal Reserve has room to carry out its new monetary stimulus program.

“If you take out food and energy, you are essentially looking at a number that didn’t go anywhere and was actually probably a little weaker than expected,” said Cary Leahey, an economist at Decision Economics.

“These kinds of energy prices are debilitating to the economy and it is one of the reasons why we haven’t been able to get any kind of a glide speed above a 2 percent annual rate.”

The Labor Department said on Friday its seasonally adjusted Producer Price Index increased 1.1 percent last month. Economists polled by Reuters had expected prices at farms, factories and refineries to rise 0.7 percent after climbing 1.7 percent in August.

The Labor Department’s report agreed with the sentiment survey that showed consumers’ one-year inflation expectations fell to 3.1 percent from 3.3 percent.

Euro Watch: Europe Forecast Uncertain as Business and Consumer Confidence Fall Again

The European Commission reported that its economic sentiment indicator for the 17 European Union members that use the euro fell by 1.1 points, to 85.0, the seventh consecutive month of decline.

For the 27-member European Union, confidence fell by 0.9 points in September, to 86.1. An indicator of more than 100 shows more confidence than not about the economy in five sectors surveyed.

The commission attributed the weakening to declining confidence in the services, retailing, industrial and consumer sectors. It cited increased optimism in the fifth sector, construction, as a promising sign.

The data is “another warning that the euro zone economy is sinking further into recession,” Jonathan Loynes, chief European economist at Capital Economics, wrote in an analysis, adding that the results dashed hopes that the European Central Bank’s pledge on Sept. 6 “to take more decisive policy action might have improved sentiment towards the broader economy.”

Mr. Loynes said the confidence results were consistent with an annual contraction in the euro zone economy of about 2.5 percent.

Figures from the core euro zone economies were mixed.

In Germany, the Federal Labor Agency said the number of unemployed rose for the sixth consecutive month. Although the seasonally adjusted unemployment rate held steady at 6.8 percent in September, there were 9,000 more people out of work than in August.

As a result of structural changes in the early 2000s, the German labor market has remained resilient during the crisis in much of Europe. But the Labor Agency predicted the German job market would cool in the rest of 2012 as growth slowed and the impact of the euro zone crisis began to take a toll.

Germany’s labor market has been one of the main drivers of its growth this year, Carsten Brzeski, an economist with ING in Brussels, wrote, and the data Thursday suggests that the slowdown of recent months “seems to have come to at least a temporary halt.” Nonetheless, he added, hiring is losing momentum and manufacturers will probably begin to shed jobs soon. He estimated that the German unemployment rate would return to 7 percent by the end of 2012.

On Wednesday, the Labor Ministry in France said the number of jobless there rose for a 16th consecutive month in August to reach more than three million, its highest level since June 1999.

On Friday, President François Hollande’s government will present its proposed 2013 budget. The finance minister, Pierre Moscovici, has said that the government will cut the deficit to 3 percent of gross domestic product, in line with European rules, from the 4.5 percent expected this year.

Data from the European Central Bank showed that growth in M3 money supply, a measure of lending activity, decelerated significantly in the euro zone in August, to 2.9 percent, from 3.6 percent in July. That was well below market expectations, according to Michael Schubert, an economist at Commerzbank in Frankfurt.

More important, Mr. Schubert wrote in a note, was the decline in lending to nonfinancial companies, which dropped 0.8 percent from a year earlier, while loans to households rose 0.2 percent.

“The E.C.B. probably sees fragmented financial markets as one reason for the low loan momentum,” he wrote, and it therefore believes the new bond purchase program announced by the bank’s president, Mario Draghi, is justified.

Mr. Draghi said on Sept. 6 that the European Central Bank was prepared to buy the bonds of embattled euro zone countries in “unlimited” quantities to quell the crisis, which has driven some members’ financing costs to levels seen as unsustainable.

Melissa Eddy contributed reporting from Berlin.