AABP EP Awards 728x90

Saving, not spending

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Consumer spending was flat in December as households took advantage of the largest rise in income in nine months to boost their savings, Reuters reported after the release of a report from the U.S. Department of Commerce.

Economists had expected consumer spending, which accounts for more than two-thirds of U.S. economic activity, to nudge up 0.1 percent, the same as in November, Reuters said.

For all of 2011, spending rose 4.7 percent, the largest increase since 2007.

“Despite the healthy gains in income, U.S. consumers appear to have rediscovered a new sense of frugality,” said Millan Mulraine, an economist at TD Securities.

When adjusted for inflation, spending dipped 0.1 percent, breaking three straight months of gains. It increased 0.1 percent in November.

The government reported Jan. 28 that consumer spending grew at a 2 percent annual pace in the fourth quarter, helping to lift gross domestic product 2.8 percent, an acceleration from the third quarter’s 1.8 percent rate, Reuters said.

Part of the spending, which has been concentrated in motor vehicles, has been funded from savings and credit cards as high unemployment constrains wage growth, Reuters said.