Americans boosted their spending in December by the largest amount in 5 months as end-of-year financing deals and other incentives on cars and other big-ticket items proved too good to pass up.
The Commerce Department reported that consumer spending jumped by 0.9 percent in December 2002 from November 2002, when spending rose 0.4 percent. December's increase, the largest since July, provided a helping hand to the struggling economy.
Consumer spending accounts for two-thirds of all economic activity in the U.S.
Americans' incomes, including wages, interest, and government benefits, meanwhile, rose by a solid 0.4 percent in December, up from a 0.3 percent rise the month before. Income growth is important because it provides the fuel for future spending.
Even with the good news in December, consumers — the main force keeping the economy going — got tired in the fourth quarter as a whole. That was a major factor in the economy's growth at only a 0.7 percent annual rate in the final 3 months of 2002, the U.S. government reported last week.
In the fourth quarter, consumers increased their spending at only a 1-percent rate, the worst showing since the first quarter of 1993 and down from a brisk 4.2-percent growth rate in 2002's third quarter.
Worries about a possible new war, a sluggish job market and a turbulent stock market were factors in the fourth-quarter slowdown.
Still, economists are optimistic that consumers will keep their pocketbooks and wallets open wide enough to prevent the economy from backsliding into recession. Economists believe the economy picked up momentum in the current quarter, growing at a rate of around 2.5 percent or more.
However, war with Iraq would no doubt chill consumers' appetite to spend, economists warned.
For all of 2002, consumer spending rose by 4.5 percent, matching the increase registered in 2001.
Americans' incomes rose 3 percent in 2002, a slowdown from 2001's 3.3 percent advance, as the dismal job market took its toll on workers. Last year's income growth matched the gain posted in 1958 and was weaker only in 1954.
In December, consumer spending on durable goods, such as cars, jumped by 6.1 percent, the largest increase since October 2001, and up from a 0.9-percent rise in November.
Spending on nondurables, such as clothes and food, and spending on services slowed in December, with each rising by just 0.2 percent in December. (AP)
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