The US Congress has completed work on a two-month extension of a payroll tax cut for 160 million American workers that otherwise would have expired on December 31. The news wraps up a tumultuous year of battles over spending and taxes.
The legislation now goes to President Barack Obama for signing into law. Also, congressional negotiators now will begin looking for a way to extend the lower payroll tax through 2012, as Obama has requested.
So far, Democrats and Republicans have been unable to agree on how to pay the approximately $200 billion cost of a full-year tax cut extension, along with continuing some unemployment benefits and doctor payments for Medicare healthcare patients.
Spending subdued, signs of housing pick-up
Meanwhile, figures show that US consumer spending was tepid in November and a gauge of business investment plans fell for a second straight month, pointing to some loss of momentum in the economy.
But other data added to signs that a tentative recovery in the housing market was under way, which should help to support growth.
Consumer spending ticked up 0.1% last month, the Commerce Department said, after rising by the same margin in October. Economists had expected spending, which accounts for two-thirds of US economic activity, to rise 0.3%. When adjusted for inflation, spending rose 0.2% last month after a similar gain in October.
In another report, the department said non-defence capital goods orders excluding aircraft, a closely watched indicator of business spending, fell 1.2% last month after declining 0.9% in October. Shipments of these so-called core capital goods, which go into calculations of US gross domestic product, also fell.
The reports tempered expectations for fourth-quarter economic growth, although many analysts still expect it to top a 3% annual rate after a 1.8% third-quarter pace.
The tepid consumer spending data stood in stark contrast with the robust sales reported for Black Friday, the traditional start to the holiday shopping season. Some retailers have been forced to offer heavy discounts to get shoppers to spend.
Incomes ticked up 0.1%, the weakest reading since August, as wages and salaries fell. Disposable income was flat. A strengthening in the labour market has offered some hope income growth will quicken, but analysts said the report augured poorly for consumer spending at the start of 2012.
While households may be spending less, they are starting to show more interest in buying houses. Sales of new single-family homes rose 1.6% in November to a seasonally adjusted 315,000-unit annual rate - the highest in seven months.
In addition, the months' supply of houses on the market dropped to a five-and-a-half-year low, in a further sign of a budding recovery.
Data this week showed a rise in sales of previously owned homes and surge in housing starts, but further progress will depend on the health of household finances.
The US economy continues to show resilience in the face of slowing global demand. New orders for long-lasting manufactured goods jumped 3.8% last month after being flat in October.
Excluding transport, orders rose 0.3% after rising 1.5% in October. Durable goods range from toasters to big-ticket items such as aircraft which are meant to last three years and more.
