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U.S. wages, spending rise
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December 23, 1999: 3:50 p.m. ET
Economy roars in November, durable goods rebound too; Fed rate hike seen
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NEW YORK (CNNfn) - Americans’ wages and spending continued rising last month and orders for big-ticket manufactured goods rebounded, bolstering economists’ predictions of a Federal Reserve interest rate hike.
Personal income rose 0.4 percent in November while spending grew 0.5 percent, the Commerce Department said -- figures in line with forecasts by analysts polled by Briefing.com. Personal income rose 1.3 percent in October and spending was up 0.6 percent.
Separately, the Commerce Department said orders for durable goods -- items such as cars or dishwashers, designed to last three years or more -- rose 1.2 percent last month after two months of declines. Analysts expected a rise of 1 percent.
Excluding transportation orders, which can fluctuate widely, durable orders rose 2.2 percent.
One analyst attributed the boom in spending to Wall Street’s stellar ride recently, marked largely by a rise of greater than 40 percent in the Nasdaq Composite in the last two months.
"We’re spending more than we’re making largely
because the stock market is doing so well,” John Lonski, a senior economist with Moody’s Investor Service, told CNNfn. "Never before in the history of the economy have consumers enjoyed such an increase in terms of wealth generated by an equity price rally.”
And investors, unfazed by the strong economic data, continued to pour into stocks following the news. The Dow Jones industrials rose nearly 2 percent, while the Nasdaq composite index rallied 1.5 percent, both to new record highs.
The data had little effect on bonds at first. But late in the day, the 30-year benchmark resumed its fall and lost 13/32 in price for a yield of 6.48 percent, up from 6.45 percent late Wednesday.
Fed still on watch
Such continued signs of a blockbuster U.S. economy cemented economists’ beliefs the Fed will raise the federal funds rate, or the rate banks charge each other for overnight loans, from the current 5-1/2 percent at its next meeting.
"The only way the Federal Reserve might find
reason not to hike rates at its Feb. 2 meeting would be if there were some unforeseen global economic crisis developing,” Lonski said.
"Barring that possibility, I would be very much prepared for a 5-3/4 percent Federal funds rate by
Feb. 2,” Lonski said.
The Fed, the nation’s central bank, held rates steady when its policy makers met Tuesday after raising them three times earlier this year in a bid to slow the red-hot economy and ward off inflation.
Larry Wachtel, market analyst at Prudential Securities, said: "If this economy continues to wallop along, the Fed will tighten again.”
Spending in particular is closely watched by economists, since consumers fuel two-thirds of the U.S. economy through their purchases of goods and services.
Rounding out the day’s economic reports, the Labor Department said new jobless claims rose 14,000 to 281,000 last week, a level that still points to a tight job market. 
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Commerce Department
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