Consumer Spending Rises

Washington, DC, Feb. 2–Consumer spending increased in December and outpaced an uptick in income. But the personal savings rate was the lowest recorded all year.

Personal spending rose 0.4%, after a revised 0.5% gain in November, the Commerce Department reported Monday. Income edged up 0.2%, following a revised 0.3% increase.
Economists had expected spending to rise 0.5% and income to climb 0.1%, according to a survey by Dow Jones Newswires and CNBC.

Disposable personal income, or income after taxes, rose 0.2%, after a 0.3% advance in the prior month.

The government last week gave its first estimate of gross domestic product during the last three months of 2003. It showed the economy–and consumer spending–slowed sharply from the red-hot pace of the third quarter. Consumer spending makes up about two-thirds of U.S. economic activity.

Spending on durable goods, items such as cars and refrigerators that are meant to last three years or more, rose 1.8%, after a 1% increase in November, the Commerce Department reported Monday.

Spending on nondurable goods, items such as food and clothing, was flat, after a 0.7% gain. Spending on services grew 0.4%.

Personal saving as a percentage of disposable personal income dropped to 1.3% from 1.5%. It was the lowest level since the 1.3% recorded in December 2002.

An inflation measure in the report fell. A price index for personal consumption expenditures less food and energy increased at a 0.7% rate, lower than its November pace of 0.9%.