Consumers boost spending by healthy 0.4 percent in December

Monday, February 2nd 2004, 12:00 am
By: News On 6

WASHINGTON (AP) _ Consumers kept the nation's cash registers busy in December, boosting their spending by a healthy 0.4 percent in a fresh sign that the economy's recovery has legs.

The over-the-month increase reported by the Commerce Department Monday followed a brisk 0.5 percent rise in consumer spending for November _ even better than the government previously estimated.

The latest snapshot of consumers' spending appetite showed that 2003 ended on a good note. Consumers spent at a solid clip in both November and December _ an improvement from the prior two months when their spending was flat.

Americans' incomes, meanwhile, rose by modest 0.2 percent in December, following a 0.3 percent rise the month before.

The spending and income figures are not adjusted for price changes.

Consumers, whose spending accounts for roughly two-thirds of all economic activity in the United States, have been buying at a sufficient pace to keep the economic recovery rolling along.

The economy grew at a healthy 4 percent annual rate in the October-to-December quarter, although it was a slowdown from the sizzling 8.2 percent rate registered in the previous quarter. That marked the strongest performance in nearly two decades.

Consumers took a break from a buying binge and spent modestly for much of the fourth quarter. Their spending went up at a 2.6 percent rate, down from a 6.9 percent growth rate in the third quarter, the fastest clip since 1986.

Analysts were predicting a slowdown in economic growth _ and consumer spending _ in the fourth quarter as the stimulative impact of tax cuts and a refinance frenzy faded with the onset of winter.

Economists are optimistic that consumer spending _ helped by tax refunds _ is picking up in the current quarter and will help the economy expand at a rate of more than 4 percent.

In Monday's report, income growth in December was on target with analysts' projections, while the spending increase was slightly weaker than the 0.5 percent rise that some economists were forecasting.

In December, consumers increased spending on ``durable'' goods, such as cars and appliances by a strong 1.8 percent, up from a 1 percent advance in November.

Spending on services rose by 0.4 percent for the second month in a row. Spending on ``nondurables'' such as food and clothes, held steady in December, after a brisk 0.7 percent increase the month before.