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Consumer spending in the U.S. grew less than forecast in the third quarter, underscoring why Federal Reserve policy makers are zeroing in on fighting unemployment to spur the world’s largest economy.

Household purchases climbed at a 1.4 percent rate, the smallest gain in more than a year and down from a previously reported 2 percent advance, revised figures from the Commerce Department showed today in Washington. Gains in inventories and a smaller trade deficit more than offset the slowdown to propel gross domestic product to a 2.7 percent rate, exceeding the 2 percent pace previously reported.

“The economy is moving forward at a moderate pace,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The pace of consumer spending was disappointing, but it seems less worrisome given that some other sectors of the economy are doing better, like housing.”

Fed policy makers such as William Dudley say joblessness remains too high as central bankers consider whether they need to step up record stimulus heading into the so-called fiscal cliff of tax increases and spending cuts that may take effect next year if lawmakers fail to reach a compromise. At the same time, another report today reinforced signs of a rebound in housing that is helping underpin consumer confidence.

Economists projected consumer spending, which accounts for about 70 percent of the economy, expanded at a 1.9 percent pace last quarter, according to the median forecast in a Bloomberg survey. The revised reading was lower than any of the 18 estimates, which ranged from 1.7 percent to 2.7 percent. Purchases advanced at a 1.5 percent pace in the second quarter.

Bloomberg Survey

GDP, the volume of all goods and services produced, was forecast to have expanded at a 2.8 percent rate, according to the median estimate of 82 economists surveyed. The economy grew 1.3 percent in the second quarter.

The Standard & Poor’s 500 Index rose amid investor optimism that lawmakers will reach an agreement on budget talks. The 500 Index climbed 0.4 percent to 1,415.95 at the close in New York.

Elsewhere today, German unemployment increased in November for an eighth straight month as Europe’s debt crisis curbed business investment and economic growth. In Japan, retail sales fell in October by the most in 11 months as consumers purchased fewer cars and televisions.

Investor Confidence

Investors are gaining confidence the worst may be over as China’s prospects improve and the U.S. looks likely to avoid the so-called fiscal cliff, according to results of the latest Bloomberg Global Poll issued today. Two-thirds of the 862 surveyed described the global economy as either stable or improving. That’s up from just over half in the September survey and the most since May 2011.

Other reports today showed consumer confidence in the U.S. climbed to a seven-month high last week, and more Americans signed contracts in October to buy a previously owned house.

The index of pending home resales climbed 5.2 percent last month, exceeding the highest estimate in a Bloomberg survey of economists, figures from the National Association of Realtors showed today in Washington. The median forecast in the Bloomberg survey called for a 1 percent gain.

The Bloomberg Consumer Comfort Index rose to minus 33 in the period ended Nov. 25, the highest level since April, from minus 33.9 the previous week. It marked the highest level for a Thanksgiving week, when shoppers begin their year-end holiday gift buying, since before the recession began five years ago.

Chain Stores

An improving housing market may further lift spirits, benefiting stores such as Target Corp. and Macy’s Inc. after retailers posted November same-store sales that trailed analysts’ estimates as superstorm Sandy cut traffic early in the month, overwhelming gains from the start of holiday shopping.

Sales at Macy’s, the second-biggest U.S. department-store company, fell 0.7 percent, compared with the average projection for a 2.5 percent gain from analysts surveyed by researcher Retail Metrics Inc. Target, the second-largest U.S. discount chain, posted a 1 percent decline in same-store sales, missing the estimate for a 2.1 percent increase.

Sandy, the largest Atlantic storm ever to hit the U.S., may trim as much as 0.5 percentage point from fourth-quarter GDP, according to Jan Hatzius, chief economist at Goldman Sachs Group Inc. in New York. Nonetheless, reconstruction work may add as much as 0.75 point to growth in the first quarter of 2013, he estimates.

The job market, albeit improving, will reflect a setback from Sandy for some months. Payrolls rose by 90,000 workers in November after climbing by 171,000 the prior month, according to the Bloomberg survey median ahead of Labor Department data due Dec. 7. The unemployment rate probably held at 7.9 percent.

‘Unacceptably High’

Dudley, president of the Federal Reserve Bank of New York, today said he is weighing “unacceptably high” joblessness as he considers whether the central bank should increase its asset purchases.

“Although the economy continues to expand, we must grow faster if we are to put all of our jobless workers and idle businesses back to work,” Dudley, who is also vice chairman of the policy-setting Federal Open Market Committee, said in a speech at Pace University in New York.

A Labor Department report today showed fewer Americans filed first-time claims for unemployment insurance payments last week as the labor market disruptions wrought by superstorm Sandy ebbed. Applications for jobless benefits decreased by 23,000 to 393,000 in the week ended Nov. 24.

Spending Revision

The slowdown in consumer spending last quarter reflected fewer purchases of auto fuel and services such as utilities, insurance and financial transactions, the Commerce Department report showed.

The revisions also showed why households may be cutting back. After-tax income adjusted for inflation rose at a 0.5 percent annual rate in the third quarter, compared with a previously estimated 0.8 percent pace. Wages and salaries rose by $30.4 billion, less than the initially reported $43.3 billion.

Wage gains in the prior period were cut as well, with the new data showing a $23.3 billion second-quarter gain that was about half the previous estimate of $55.2 billion.

Today’s GDP report also offered a first look at corporate profits. Earnings before taxes climbed 3.5 percent in the third quarter from the previous three months, and rose 8.7 percent from the same period last year.

Trade and inventories were the bright spots in the report. The trade deficit shrank to $403 billion, less than the $413.7 billion previously estimated and down from $407.4 billion in the prior quarter.

Inventory Boost

Inventories provided a boost to GDP growth rather than being a drag as first estimated. Stockpiles contributed 0.77 percentage points to growth, compared with a prior estimate that showed they subtracted 0.12 percentage point. At the same time, larger inventories mean businesses may limit production in the fourth quarter unless demand accelerates.

Fed Chairman Ben S. Bernanke has said an agreement on reducing long-term federal budget deficits without abrupt tax increases and spending cuts would remove a barrier to growth.

“A plan for resolving the nation’s longer-term budgetary issues without harming the recovery could help make the new year a very good one for the American economy,” Bernanke said in a Nov. 20 speech.

(Update with closing stock prices in seventh paragraph.)