Consumer spending at fastest pace in 3 years
WASHINGTON — Americans spent at the fastest pace in three years in 2010, boosted by a strong finish in December.
Consumer spending rose 0.7 percent in December, the sixth straight monthly increase, the Commerce Department reported Monday. Households saw their incomes rise 0.4 percent, the same as November.
For all of 2010, consumers boosted spending 3.5 percent. That was the best performance since a 5.2 percent rise in 2007, before the recession began.
The government reported Friday that consumer spending rose at a 4.4 percent rate in the final three months of 2010 — the most since 2006 and helping retailers to the best holiday shopping season in that time.
Economists expect a cut in Social Security taxes will lift January's spending and incomes even further that last month.
But Paul Dales, senior U.S. economist at Capital Economics, said the boost could be short-lived without job growth.
For 2010, incomes rose 3 percent after having fallen 1.7 percent in 2009. Still, incomes grew at the second-lowest annual pace in the eight years.
The rise in incomes and the faster increase in spending meant that the savings rate dipped slightly in December to 5.3 percent of after-tax incomes.
The savings rate edged down slightly to 5.8 percent, from 5.9 percent in 2009. Still the 2010 figure is well above the low of 1.4 percent hit in 2005 at the height of the housing boom when rising home prices encouraged Americans to spend more.