Washington

US household spending fell for a second straight time in December and incomes rose with more Covid-19 pandemic relief late in the month, highlighting how Covid-19 continues to impact consumers.

Purchases decreased 0.2 per cent from the prior month, following a downwardly revised 0.7 per cent decline in November, a Commerce Department report showed on Friday. That compared with estimates for a 0.4 per cent drop. Personal incomes rose 0.6 per cent, stronger than the 0.1 per cent gain projected.

Some states and cities reimposed restrictions on businesses and activity in November and December, leading to nearly half a million job losses in the leisure and hospitality sector an Personal incomes already received a boost from the passage of the US$900 billion pandemic relief package in late December. The bill included an additional round of stimulus payments and an extra US$300-a-week in supplemental jobless benefits. Additional income should help bolster spending going forward.

The Commerce Department said the increase in December income partly reflected an increase in pandemic unemployment compensation, the supplemental weekly payment for the jobless. The personal saving rate, which had surged to a record in April as a result of the rise in government social benefits, rose to 13.7 per cent, the first increase since April.

Incomes were bolstered in December by a 2.3 per cent increase in government transfer payments, a category that includes unemployment insurance. At the same time, wages and salaries advanced 0.5 per cent from the prior month. Income from dividends also rose sharply.

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Inflation-adjusted personal spending fell 0.6 per cent in December after a 0.7 per cent decline. Last month, outlays for both goods and services decreased. Services spending fell for a second month, while purchases of goods dropped 1.4 per cent, matching the November drop.

Throughout the pandemic there's been very little inflationary pressure, and December was no exception. The index of consumer prices that the Federal Reserve officially uses for its target rose 1.3 per cent in December from a year earlier. The core price index, which excludes more-volatile food and energy costs, increased 1.5 per cent. Both were the largest year-over-year gains in three months.

Looking ahead, many economists are expecting price pressures to remain broadly tame this year, with a temporary pop in inflation metrics in the second quarter. BLOOMBERG