By Glenn Somerville
WASHINGTON (Reuters) - U.S. consumers cut their spending in November and orders for costly manufactured goods slumped again, while claims for jobless aid last week hit a 26-year high as a year-old recession tightened its grip.
But there were a few glimmers of hope in the latest batch of generally gloomy data as a big drop in prices for gasoline and other goods meant consumers got more for each dollar spent and business investment showed some signs of perking up.
It didn't alter the picture of an economy still skidding deeper into recession but Wednesday's reports led some analysts to trim the rate at which they expect national output of goods and services to shrink as 2008 draws to a close.
David Greenlaw, an economist with Morgan Stanley in New York cited "modest upside surprises in consumption and capital spending" as he reduced an estimate of fourth-quarter gross domestic product contraction to a 5.9 percent annual rate from 6.4 percent, which is still the steepest drop in nearly 27 years.
There was another potentially hopeful sign that concentrated bid by policy-makers to stimulate the economy by pushing interest rates down might be bearing fruit. The Mortgage Bankers Association said applications for new mortgage loans hit the highest level in five years last week.
The housing sector was "ground zero" for the current downturn after a lengthy period of reckless lending and soaring prices that began to crash in 2007.
Stocks prices were modestly higher in light trading during an abbreviated pre-Christmas trading session where investors were hunting for bargains in already beaten-down stocks.
FED MOVES PAYING OFF
Bankers say a Federal Reserve move to buy up to $500 billion of mortgage securities backed by government-sponsored enterprises Fannie Mae
The interest rate on 30-year fixed-rate mortgage loans dropped to a 37-year low of 5.14 percent this week, according to Freddie Mac.
Consumers remain under severe pressure, as was apparent in a Commerce Department report showing that spending in November fell for a fifth straight month and incomes shrank.
Spending fell 0.6 percent after dropping 1 percent in October. As a result of falling prices for goods from gasoline to clothing, though, inflation-adjusted spending was up 0.6 percent, the first increase since May.
The report also showed incomes fell 0.2 percent after a slight gain in October, a sign of the strain consumers were under as the holiday shopping season started.
JOB OUTLOOK BLEAK
Separately, the Labor Department said the number of U.S. workers filing new claims for unemployment benefits jumped by 30,000 to 586,000 last week, the highest since November 1982, suggesting a steepening drain of jobs is likely into 2009.
"All in all, the scenario remains pretty weak," said Daniel Katzive, director of global foreign exchange for Credit Suisse in New York. The latest data wouldn't change most forecasters view that the U.S. economy is still weakening, he said.
The incoming administration of President-elect Barack Obama is preparing a huge economic stimulus package to complement the Federal Reserve's efforts at boosting economic activity through reduced interest rates.
Another report from the Commerce Department showed orders for long-lasting durable goods slipped 1 percent in November, a less severe drop than anticipated but it comes after the biggest drop in October orders since mid-2000. Orders plummeted 8.4 in October.
There were some positive notes in the durables report, as orders rose in November for computers, machinery and fabricated metal products. Transportation equipment orders, down 7.4 percent after a 12.7 percent October decline, was the main drag on orders.
Excluding transportation, durable goods orders were up 1.2 percent after falling 6.8 percent in October but analysts doubted it marked any turning-point in economic prospects. Most analysts think mid-2009 is the earliest point at which some relief from the current severe downturn may start to be seen.
Nondefense capital goods orders excluding aircraft -- a category used as a proxy for business investment plans -- rose 4.7 percent in November after falling 6.6 percent in October.
"The pickup in orders in November does not meaningfully alter the underlying weak trend, but it was a relief to see at least a pause in the downward movement," said Michael Moran, chief economist for Daiwa Securities America in New York.
The spending report showed personal savings edged up in November to 2.8 percent of disposable income from 2.4 percent in October, still a low level but a possible sign the year-old recession is causing consumers to begin putting more into bank accounts rather than spending it.
Prices fell 1.1 percent as gasoline costs continued to slide. But so-called core prices, which strip out volatile food and energy costs, held steady for a second straight month.
(Additional reporting By Alister Bull and Julie Haviv; Editing by Neil Stempleman)
