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Ahead of the Bell: US consumer spending

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December 23, 2013 06:51 AM EST | AP

WASHINGTON (AP) — The Commerce Department reports how much consumers spent and earned in November. The report will be released at 8:30 a.m. Eastern time Monday.

SPENDING UP: The forecast is that consumer spending will rise 0.5 percent, according to a survey by FactSet. Income growth is expected to increase 0.5 percent as well.

INCOME REBOUND: In October, consumers increased their spending by 0.3 percent but income growth dipped slightly, falling 0.1 percent.

SPENDING STRENGTH: Consumer spending is closely watched because it accounts for 70 percent of economic activity.

The economy as measured by the gross domestic product grew at an annual rate of 4.1 percent in the July-September quarter, the government reported Friday in its third and final look at GDP in the third quarter.

That overall gain was up from a previous estimate of GDP growth at a slower 3.6 percent rate in the third quarter. Virtually all of the upward revision reflected faster spending for consumers. That could be a good sign of momentum going into the final three months of the year.

The 4.1 percent overall growth rate in the third quarter was the best performance in nearly two years and only the second time since the recovery began in mid-2009 that growth has topped 4 percent.

Economists caution that growth will likely slow in the October-December period since two-fifths of the third quarter gain came from an unusually large buildup in business stockpiles, something that is not likely to be repeated in the current quarter.

Analysts were encouraged with the acceleration in spending in the third quarter and are hoping that rising employment will fuel more spending in the months ahead.

Retail sales have been solid in October and November along with other signs the economy is gaining momentum heading into 2014.

President Barack Obama took note of recent encouraging economic reports including four straight months of solid job gains which have pushed unemployment down to 7 percent in November, the lowest point in five years.

"What it adds up to is we head into next year with an economy that's stronger than it was when we started the year," Obama said Friday at a White House news conference. "I firmly believe that 2014 can be a breakthrough year for America."

The drag from higher taxes and across-the-board spending cuts has cut an estimated 1.5 percentage points from growth this year but will lessen next year, another factor economists note in their forecasts for an upturn to growth of around 2.5 percent or better in 2014.

A stronger outlook for the economy and job market prompted the Federal Reserve last week to begin winding down its bond-buying program, which was intended to lower long-term interest rates and encourage more borrowing and spending.

The Fed said that it would begin reducing its $85 billion-a-month in bond purchases by $10 billion in January. Fed Chairman Ben Bernanke said that if the economy keeps improving, the bond purchases could be trimmed by similar amounts at coming meetings.