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Personal incomes, consumer spending up in December (8:33 a.m. 2/1/10)

AP Economics Writer

WASHINGTON (AP) — Personal incomes rose more than expected in December and consumer spending increased for the third straight month, helping the economy slowly recover from the worst recession in decades.

The Commerce Department said Monday that incomes rose by 0.4 percent, the sixth increase in a row. That’s slightly better than analysts’ expectations of 0.3 percent growth.

Income growth was spurred by a large, one-time social security payment. Wages and salaries rose by only 0.1 percent, or $9.1 billion, after increasing 0.4 percent, or $27 billion, in November.

Consumer spending, meanwhile, increased by 0.2 percent, less than analysts’ forecasts of 0.3 percent. The department also revised November’s figure to show a 0.7 percent increase in spending, higher than the initial estimate of 0.5 percent.

Consumer spending is closely watched because it accounts for about 70 percent of total economic activity. In last year’s fourth quarter, consumer spending rose by 2 percent, down from a 2.8 percent increase in the July-September period.

That helped boost the nation’s gross domestic product, the broadest measure of the economy’s output, by 5.7 percent in the fourth quarter, the fastest growth in six years. The economy grew at a 2.2 percent rate in the third quarter after a record four straight quarters of decline.

Still, many economists are concerned growth will likely sputter to a 3 percent pace or below in the current quarter once temporary factors such as government stimulus and a slowdown in inventory reductions fades. Many economists expect the economy to grow at about a 2 percent pace this year.

That won’t be fast enough to reduce the unemployment rate, which currently stands at 10 percent.

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