Consumers put aside worries about slumping home sales and soaring gasoline prices and headed to the malls in November, pushing spending up by the largest amount in 3 1/2 years.
The Commerce Department reported Friday that consumer spending surged by 1.1 percent last month, nearly triple the October gain. The gain reflected various promotional efforts by retailers such as heavy discounting and longer store hours at the start of the holiday shopping season.
Consumer spending is closely watched because it accounts for two-thirds of total economic activity. Many economists believe that overall economic growth will be at a barely discernible rate of 1 percent in the current quarter, as the country struggles with the fallout from the housing downturn and a spreading credit crisis that has made bank loans harder to get for individuals and businesses.
While the risks of a recession have risen, the Federal Reserve is fighting to avert a full-blown downturn by cutting interest rates. It has not been as aggressive as financial markets want, however, because of Fed worries about inflation pressures.