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Consumer-spending growth slows

Paul Dales, at Capital Economics, predicts the economy will begin growing again this quarter.

David Goldman /Associated Press/File 2012

Paul Dales, at Capital Economics, predicts the economy will begin growing again this quarter.

WASHINGTON — US consumers increased their spending in December at a slower pace, while incomes grew by the largest amount in eight years, mostly beacause companies rushed to pay dividends before income taxes increased on high-earners.

The Commerce Department said consumer spending rose 0.2 percent, slightly slower than November’s 0.4 percent increase.

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Income jumped 2.6 percent in December from November, the biggest gain since December 2004.

Wages and salaries grew 0.6 percent.

Consumer spending, which accounts for about 70 percent of US economic activity, is expected to slow this year because consumers are receiving less take-home pay. Starting this month,Social Security taxes increase.

The economy unexpectedly shrank in the October-to-December quarter at an annual rate of 0.1 percent, the government said Wednesday. The contraction was largely driven by a steep cut in defense spending. Still, it was a reminder of the economy’s vulnerability.

For all of 2012, income rose 3.5 percent overall, the weakest increase since 2009, the final year of the Great Recession.

Still, consumers saw little increase in prices last year.

A gauge of inflation preferred by the Federal Reserve was flat in December and up just 1.3 percent in 2012.

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