Washington, DC, Jan. 31—Consumers increased their spending in December by 0.9%, the largest increase in five months, giving the struggling economic recovery a helping hand. The increase came after a 0.4% advance in November and marked the biggest increase in consumer spending since July, according to the Commerce Department.
Americans' incomes, including wages, interest and government benefits, meanwhile, rose 0.4% in December, up from a 0.3% rise the month before. Income growth is important because it provides the fuel for spending in the future.
December's spending and income figures were stronger than analysts were expecting. They were predicting spending to go up by 0.7% and incomes to grow by just 0.2%.
Even with the good news in December, consumers tired in the fourth quarter overall, a major factor in the economy growing at only a 0.7% annual rate in the final three months of the year.
Worries about a possible war with Iraq, a sluggish job market and a turbulent stock market were factors in the fourth quarter slowdown.
Still, economists are optimistic consumers will keep their pocketbooks and wallets open and help along the economy. Economists believe the economy picked up momentum in the current quarter, growing at a rate of around 2.5% or more.
For the year, consumer spending rose by 4.5%, matching the increase registered the year before. Americans' incomes, however, rose by 3%, down from a 3.3% advance in 2001, and the smallest increase since 1954.
