Consumer Spending Flat in December as Households Boosted Savings

Consumer spending was flat in December after growing just 0.1 percent in November, the Commerce Department said on Monday, as households took advantage of the largest rise in income in nine months to boost their savings.

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Spending rose 4.7 percent in 2011, the largest annual increase since 2007, but when adjusting for inflation, spending dipped 0.1 percent in the final month of the year, breaking three months of gains and setting the tone for a slowdown in 2012.

Consumer spending grew at a 2.0 percent annual pace in the fourth quarter after rising 1.8 percent in the third.

As high unemployment has constrained wage growth, spending has largely been funded by savings and credit cards. When wages rose last month, Americans took advantage of the increased incomes to pay off debt and rebuild their nest eggs.

Incomes rose 0.5 percent in December, the largest gain since a matching increase in March, following a 0.1 percent rise in November. When accounting for inflation, disposable income rose 0.3 percent last month after being flat in November.

The savings rate rose to 4.0 percent in December from 3.5 percent in the previous month. Savings increased to an annual rate of $460.1 billion, the highest since August, from $407.8 billion in November.

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To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com