The revisions also showed why households may be cutting back. After-tax income adjusted for inflation rose at a 0.5 percent annual rate, compared with a previously estimated 0.8 percent pace as wages and salaries in the third quarter 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 than the previous estimate of $55.2 billion.
Improving sentiment may help put a floor under spending. Consumer confidence climbed to a four-year high in November, a report from the Conference Board showed this week. Household finances and outlooks are benefiting from improving real-estate prices as record-low mortgage rates drive a recovery in housing.
The holiday shopping season got under way last week as Thanksgiving Day openings and midnight deals at chains from Target Corp. to Wal-Mart Stores Inc. drew customers. Spending in stores and online rose 13 percent to $59.1 billion in the four days starting Nov. 22, the National Retail Federation reported. A year ago, sales advanced 16 percent over the holiday weekend.
The economy expanded at a “measured pace” in recent weeks as gains in consumer demand and housing were tempered by a slowdown in manufacturing and the impact of Sandy, the Federal Reserve said in its Beige Book business survey released yesterday. Policy makers are continuing with monthly purchases of $40 billion in housing debt to boost the three-year economic expansion.
Today’s Commerce Department report also offered a first look at corporate profits. Earnings 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.