US consumer spending rises in December but incomes flat

WASHINGTON (AFP) - US consumers spent more in December, but at a slower pace from the previous month as personal incomes held unchanged, data released on Friday showed.

The Commerce Department said consumer spending rose 0.4 per cent in December, a slowdown from the 0.6 increase in November. The December pace was twice as strong as analysts expected.

But in a worrying sign for future spending, the key driver of the US economy, personal income was flat, after a slight 0.2 per cent rise in November.

Wages and salaries, the largest component of personal income, also was flat after rising 0.5 per cent in the prior month.

Disposable personal income also was unchanged after edging up 0.1 per cent in November.

The data showed that consumers dipped into their savings to spend during the crucial year-end holiday shopping season. The personal saving rate as a percentage of disposable personal income was 3.9 per cent in December, down from 4.3 per cent in November.

"Q4 spending was boosted by the falling saving rate; this won't be repeated in Q1," said Mr Ian Shepherdson of Pantheon Macroeconomics.

Inflation remained tame and well below the Federal Reserve's 2.0 per cent target for price stability.

The personal consumption expenditures prices index rose 0.2 per cent in December, and was up just 1.1 per cent year-on-year. Excluding food and energy prices, core PCE prices rose 0.1 per cent in the month, and 1.2 per cent from a year ago.