U.S. consumer spending rose solidly in December as demand for goods and services increased, but the increase came at the expense of savings, which dropped to a 10-year low in a troubling sign for future consumption and economic growth.
The Commerce Department said on Monday consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.4 percent last month after an upwardly revised 0.8 percent increase in November.
Economists polled by Reuters had forecast consumer spending increasing 0.4 percent in December after a previously reported 0.6 percent rise in November. When adjusted for inflation, consumer spending rose 0.3 percent in December.
The figures were included in the advance fourth-quarter gross domestic product report published on Friday. Consumer spending accelerated at a 3.8 percent annualized rate in the October-December period, the fastest in three years, after rising at a 2.2 pace in the third quarter.
Robust consumer spending helped to offset the drag from trade and inventories on the economy, which grew at a 2.6 percent rate in the fourth quarter. GDP increased at a 3.2 percent pace in the third quarter.
Personal income rose 0.4 percent last month after advancing 0.3 percent in November. Wages increased 0.5 percent last month. Savings fell to $351.6 billion in December, the lowest level since December 2007, from $365.1 billion in the prior month.