Business

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.

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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.

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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.

Associated Press

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