Consumer spending, the biggest part of the U.S. economy, fell in November for a record fifth consecutive month as unemployment climbed, economists said before government reports today. Purchases fell 0.7 percent after a 1 percent drop in October that was the biggest in seven years, according to the median forecast in a Bloomberg News survey. Orders for long-lasting goods also fell, another report may show. Holiday sales, the most important of the year for retailers, may be the worst in at least four decades as tumbling confidence, job losses and scarce credit cause consumers to retreat. The Federal Reserve has slashed interest rates to almost zero and President-elect Barack Obama has announced an unprecedented fiscal stimulus package to limit the economic fallout. “We see the ongoing recession as likely to get worse before it gets better,” said Ethan Harris, co-chief of U.S. economic research at Barclays Capital Inc. in New York. “Consumers have been struggling with falling housing and financial wealth, job losses and tight credit.” The Commerce Department’s spending figures are due at 8:30 a.m. in Washington. Estimates of the 64 economists surveyed ranged from declines of 0.3 percent to 1.5 percent. Incomes probably were unchanged after rising 0.3 percent the prior month, the survey also indicated. Also at 8:30 a.m., Commerce may report that orders for durable goods, those meant to last several years, fell 3 percent in November, according to the survey. Excluding transportation equipment, orders probably also fell 3 percent, a fourth straight drop. More Claims A report from the Labor Department at the same time may show that for a seventh week in a row more than 500,000 Americans filed initial claims for jobless benefits, the longest stretch in 26 years, according to a Bloomberg survey. That would signal more weakness in a labor market that has lost 1.9 million jobs so far this year, hurting consumer confidence and spending. Retailers are concerned about the holiday shopping season, which brings in one-third or more of annual revenue. The International Council of Shopping Centers and Goldman Sachs Group Inc. said yesterday in a joint statement that November-December sales may fall as much as 2 percent, the most since records began in 1969. The ICSC had previously projected a decrease of as much as 1 percent. Sears Holdings Corp., the largest U.S. department-store company, this month abandoned its earnings forecast for the remainder of the year and posted a wider than anticipated third- quarter loss. Concern at Sears “Given the current economic and retail environment, we will carefully evaluate alternatives that provide financial flexibility in the near-term,” interim Chief Executive Officer W. Bruce Johnson said in a statement. Today’s spending report is also likely to confirm that inflation is retreating as demand wanes. The Fed’s preferred price gauge, which is linked to purchases and excludes food and fuel costs, was probably unchanged in November for a second month, according to the survey median. It would be the first time since 1999 that prices were unchanged in consecutive months. The inflation rate expected by investors has also fallen. The gap in yields between 10-year Treasury Inflation Protected Securities and regular Treasuries of the same maturity fell to 0.10 percent yesterday, from 2.33 percent at the start of the year. The spread is a measure of the increase in consumer prices anticipated in the coming decade. Prices overall probably fell as fuel costs slumped. The impact on economic growth will hinge on whether the drop in prices accounted for much of the expected decrease in purchases, economists said. Consumer spending declined at a 3.8 percent annual pace in the third quarter, the most since 1980, revised Commerce figures showed yesterday. The economy shrank 0.5 percent, the most since the 2001 recession. Analysts surveyed by Bloomberg forecast the economy will contract through the first half of 2009.

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