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Consumer spending picks up in December
by Greg Robb / MarketWatch
Feb 01, 2011 | 706 views | 0 0 comments | 4 4 recommendations | email to a friend | print
WASHINGTON — Consumer spending accelerated in December, a sign the U.S. economy entered 2011 with growing momentum, government data showed Monday.

Spending rose a seasonally adjusted 0.7 percent in December, higher than the 0.3 percent increase registered the previous month, the Commerce Department estimated.

Income didn't keep pace, however, rising 0.4 percent in December for the second straight month.

Economists had been looking for increases of 0.4 percent for incomes and 0.6 percent for spending.

Wages and salary income, a statistic that's key to consumer spending, increased 0.3 percent in December after having risen 0.1 percent in November.

With spending rising faster than incomes, the personal savings rate fell to 5.3 percent of disposable income from 5.5 percent in November. It was the lowest savings rate since last March.

Adjusted for inflation, personal consumption rose 0.3 percent last month.

The U.S. economy expanded at a 3.2 percent rate in the fourth quarter, fueled in large measure by faster consumer spending.

The government said consumer spending rose 4.4 percent in the fourth quarter, the fastest pace since the first quarter of 2006. Net personal incomes increased 1.7 percent.

With many households still deeply in debt, the key factor regarding the outlook for consumers' spending will be the recovery of the labor market.

Federal Reserve officials are on record that they expect the labor market's recovery will be a slow one.

Also contained in Monday's Commerce Department data, headline inflation picked up slightly in December, while prices continued to moderate at the core level, which excludes food and energy prices.
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