WASHINGTON (AP) —
Personal incomes rose more than expected in December and consumer
spending increased for the third straight month, helping the U.S.
economy slowly recover from the worst recession in decades.
the increases were modest, reflecting the reluctance of many households
to spend amid tight credit and high unemployment. Widespread
joblessness is also limiting wage and salary growth, as firms find it
easier to retain workers without raising compensation.
continue to save far more than in recent years and allocate their
spending very carefully," Julia Coronado, an economist at BNP Paribas,
wrote in a note to clients.
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.
growth was spurred by a large, one-time social security payment, the
department said. Wages and salaries rose by only 0.1 percent, or $9.1
billion, after increasing 0.4 percent, or $27 billion, in November.
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.
Spending has grown in the past six months but consumers remain cautious
as they seek to rebuild savings battered by a steep decline in
Americans saved 4.8 percent of their incomes in
December, the department said, up from 4.5 percent the previous month.
That's up sharply from the spring of 2008, when the savings rate fell
below 1 percent.
Rising spending helped the economy grow at a
rapid pace in last year's fourth quarter, the department said last
week. Consumer spending increased by 2 percent in the October to
December period, after a 2.8 percent increase in the third quarter.
helped boost the U.S. gross domestic product, the broadest measure of
the economy's output, by 5.7 percent in the fourth quarter, the
department said. It was 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.
Much of the growth was powered by
increased production as companies stabilized their inventory
stockpiles. Inventories were cut sharply in the recession as sales
slowed. As firms rebuild their inventories, the economy should benefit.
But once inventories are in line with sales, that support for the
economy will disappear.
Many economists are concerned growth will
likely sputter to a 3 percent pace or below in the current quarter once
government stimulus and inventory restocking fades. Many economists
expect the economy to grow at about a 2 percent pace this year.
likely won't be fast enough to reduce the unemployment rate, which
currently stands at 10 percent. Unemployment will likely rise for
several more months, most economists say, and remain near 10 percent
through the end of the year.
A price gauge tied to consumer
spending edged up 0.1 percent in December, below the 0.3 percent pace
in November. Excluding volatile food and energy costs, it ticked up 0.1