Personal Spending, Income Rise

Amid weak holiday shopping season, hopeful signs for consumer spending, biggest sector of economy.

Americans made and spent more money in December, the government said Friday, a hopeful sign for consumer spending, the biggest sector of the world's biggest economy.

The Commerce Department said personal income rose 0.4 percent in December while personal spending rose 0.9 percent. Economists, on average, expected income to rise 0.2 percent and spending to rise 0.7 percent, according to Briefing.com.

Personal income rose a revised 0.3 percent in November, while spending rose a revised 0.4 percent.

"These solid results suggest that the economy actually had a fair bit of momentum heading into 2003," said Douglas Porter, economist at BMO Nesbitt Burns.

The report had little impact on U.S. stock market futures, which were higher, pointing to a positive opening on Wall Street. Treasury bond prices fell.

Consumer spending is closely watched by Wall Street and economists since it fuels more than two-thirds of the total U.S. economy.

Consumer spending has been remarkably resilient despite the recession that began in March 2001, nearly 1.8 million job cuts, the Sept. 11 attacks, a wave of corporate accounting scandals, and falling stock prices.

But persistent labor-market weakness and concerns about a possible war in Iraq have weighed on consumer confidence, if not their spending.

Earlier this week, the Conference Board said its closely watched consumer confidence index fell to a nine-year low in January.

Later Friday, the University of Michigan will release its revised measure of consumer sentiment for January. Economists, on average, expect a reading of 83.5, slightly worse than the initial reading of 83.7 and December's 86.7 reading.

What's more, retailers reported a holiday shopping season that by some measures was the worst in 30 years, and consumer spending as a component of gross domestic product (GDP), rose at a paltry 1.0 percent rate in the fourth quarter, the slowest in nine years, according to a Commerce Department report Thursday.

"The thing about the quarterly figures is they're more driven by what took place at the end of the previous quarter and the start of the current quarter than what happened at end of the current quarter," Porter said. "These numbers tell us spending had a little more momentum heading into 2003 than the quarterly figures would indicate."

Source: CNN