US consumer spending flat in December

US consumer spending was flat in December as households took advantage of the largest rise in income in nine months to boost their savings, setting the tone for a slowdown in demand early in 2012.

The Commerce Department said today spending was the weakest since June and followed a 0.1 per cent gain in November.

Economists polled by Reuters had expected spending, which accounts for more than two-thirds of US economic activity, to nudge up 0.1 per cent last month. For all of 2011, spending rose 4.7 per cent, the largest increase since 2007.

When adjusted for inflation, spending dipped 0.1 per cent, breaking three straight months of gains. It increased 0.1 per cent in November.

The government reported on Friday that consumer spending grew at a 2.0 per cent annual pace in the fourth quarter, helping to lift gross domestic product 2.8 per cent - an acceleration from the third-quarter's 1.8 per cent rate.

Part of the spending, which has been concentrated in motor vehicles, has been funded from savings and credit cards as high unemployment constrains wage growth.

Wages rose last month, helping to prop-up incomes. Income advanced 0.5 per cent, the largest gain since a matching increase in March, and followed a 0.1 per cent rise in November. Economists had expected income to rise 0.4 per cent.

Taking inflation into account, disposable income rose 0.3 per cent after being flat the prior month. With disposable income outstripping spending, the saving rate rose to 4.0 per cent from 3.5 per cent in November.

Savings increased to annual rate of $460.1 billion, the highest since August, from $407.8 billion the prior month.

The report showed inflation pressures generally contained, with a price index for personal spending nudging up 0.1 per cent after being flat the prior month.

Reuters