December consumer spending up 0.4% but savings drop to 10-year low

Washington

US consumer spending rose solidly in December as demand for goods and services increased, but the gain 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 that consumer spending, which accounts for more than two-thirds of US economic activity, increased 0.4 per cent last month after an upwardly revised 0.8 per cent increase in November. Households continued to dip into savings to maintain spending amid sluggish income growth. Savings are now at levels last seen in December 2007, when the economy slipped into recession, and are a red flag for both consumer spending and economic growth.