Consumer spending jumps in December

By Reuters
Posted Jan. 31 at 7:44 a.m.

U.S. consumer spending rose more than expected in December to post the sixth straight month of gains as households drew down on their savings to fund purchases, government data showed Monday.

The Commerce Department said spending increased 0.7 percent after rising by 0.3 percent in November.

Economists polled by Reuters had expected spending, which accounts for about 70 percent of U.S. economic activity, to increase 0.5 percent last month.

The spending figures were included in the government’s fourth-quarter gross domestic product (GDP) report released Friday, which showed the economy grew at a 3.2 percent pace on the back of the robust consumer spending.

Spending in the fourth quarter grew at a brisk 4.4 percent pace, the fastest in more than four years. While economists see spending remaining strong this year, they expect the pace of growth to be less brisk than in the last three months of 2010.

Spending in December came as incomes rose 0.4 percent and savings dropped to their lowest level since March. Incomes grew 0.4 percent in November and the increase last month was in line with economists’ expectations. Savings fell to $614.1 billion from $634.4 billion in November.

The report also showed the Federal Reserve’s preferred measure of consumer inflation — the personal consumption expenditures price index, excluding food and energy — was unchanged in December after edging up 0.1 percent in November. In the 12 months through December, the core PCE index rose 0.7 percent, the smallest increase since records began in 1959, after increasing 0.8 percent in November.

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