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WASHINGTON — Economic growth is picking up in the final three months of the year, fueled by higher consumer spending, rising business stockpiles and modest increases in hiring.
The start of the holiday shopping season in November helped produce the sixth straight monthly increase in retail sales. Gift-buying Americans spent more on clothing and electronics, and sales of autos and furniture also rose.
Still, the improvement might not last. Unemployment remains high, and incomes are stagnant. That's likely to restrain growth early next year. So could any worsening of Europe's financial crisis.
Because pay raises have been slight, consumers have dipped into savings to finance much of the additional spending. That trend may not be sustainable.
"Looking ahead to early next year, we expect consumer spending to slow markedly amid sluggish income growth, shrinking household wealth, low savings and tight credit conditions," Michelle Meyer, an economist at Bank of America Merrill Lynch, said in a note to clients.
For now, the economic data remains encouraging. Job openings declined slightly in October, but they were still at the second-highest level in three years.
Businesses also built up their inventories in October, after holding them steady in September. That means extra factory production was likely needed to increase companies' stockpiles.
Overall, most analysts expect the economy to grow at an annual rate of at least 3 percent in the October-December quarter, up from 2 percent in the July-September period.
Retail sales rose 0.2 percent in November, the government said Tuesday. That was lower than October's gain, which was revised up to show a 0.6 percent increase. And it was the smallest increase in five months.
Even so, more spending on retail goods shows the economy is continuing to grow steadily, if slowly.
An increase in furniture and auto sales suggested that consumers made more big purchases in November. So-called "core" sales, which exclude the volatile categories of autos, gasoline and building materials, rose for an 11th straight month.
At the same time, sales fell at gasoline stations and restaurants.
"People decided to go to the store and do their shopping rather than go to the restaurant," Jonathan Basile, an economist at Credit Suisse.
The dip in job openings in October followed a three-year high in September.
Each opening is sparking heavy competition. Nearly 14 million people were unemployed in October. That means there was an average of 4.25 people out of work for each available opening. That's worse than September's ratio of 4.14. In a healthy economy, an average of only about two people vie for each opening.
And business inventories rose 0.8 percent in October. When companies build up their inventories, it usually signals that they expect more sales.
The report is the government's first read on monthly consumer spending, which accounts for 70 percent of economic activity.
Even though retail sales rose only slightly from October to November, they've increased more sharply over a broader period. Sales have surged 6.7 percent, for example, over the past 12 months. That's less than the 7.5 percent increase from October 2010 to October 2011. But it's still evidence of healthy spending.
Chris Christopher, an economist at IHS Global Insight, forecasts that holiday sales will rise by slightly less than 5 percent this year, compared with 5.2 percent in 2010. Holiday sales fell in 2008 and 2009. Christopher defines holiday sales as retail sales in November and December, excluding autos, gas, and restaurants.
Christopher cautions, though, that about a third of this year's increase is due to rising prices. Inflation rose 3.5 percent in the 12 months that ended in October. That's up from a 1.2 percent rate for the 12 months ending in October 2010.
Higher inflation, spurred by a jump in gasoline prices, reduced consumers' buying power in the spring and early summer. That's a big reason why the economy barely grew in the first half of this year.
Higher inflation has also eroded wages. After-tax, inflation-adjusted incomes dropped 2.1 percent in the July-September quarter. That's the biggest drop since the third quarter of 2009.
Fortunately for the economy, those trends have showed signs of reversing. Gas prices have dropped. And inflation has slowed in recent months; it dipped 0.1 percent in October. After-tax, inflation-adjusted incomes rose 0.3 percent in October. It was the first gain after three months of declines.
Paul Dales, a senior U.S. economist at Capital Economics, notes that the larger spending increases over the summer came after consumers had dipped into their savings to make up for smaller gains in income. He thinks consumers might be forced to pull back.
"November's modest rise could therefore be the start of a period in which households start to spend more within their means," Dales said.
Americans spent $52.4 billion over the Thanksgiving holiday weekend, according to the National Retail Federation. The record amount was spurred by deep discounts and early store openings. But economists think consumers held back on spending in the rest of November, to wait for the deals and discounts that weekend.
Online holiday sales are also growing, although they are expected to peak this week. Many shoppers tend to complete orders by mid-month to allow time for presents to be shipped.
Merchants can make up to 40 percent of their annual revenue during the holiday shopping season, which includes November and December.
Automakers have reported strong sales for November. Chrysler, Ford, Nissan and Hyundai reported double-digit sales gains. November is usually a lackluster month for auto sales because of cold weather. But automakers offered steep discounts and many consumers can't wait any longer to replace their aging vehicles.
More demand has helped boost hiring. Employers added a net total of 120,000 jobs last month. The economy has generated 100,000 or more jobs five months in a row — the first time that has happened since April 2006.
Consumers might also have to cut back on spending if Congress doesn't extend a Social Security tax cut or emergency federal unemployment benefits. Both expire at the end of this year. The Social Security tax this year boosted take-home pay for the average family by $1,000.
Economists also fear that Europe's debt crisis could worsen and plunge the region into a recession. That could slow demand for U.S. exports, tighten lending and make it harder for U.S. businesses to expand.
