Personal Income Grows; Spending Slips

Americans cut back on spending a bit in December as free-financing offers for cars and other incentives began to wane. But incomes rose for the first time in four months, putting consumers in a better position to spend in the months ahead, economists said.

The Commerce Department said consumer spending dropped 0.2% in December. That followed a revised 0.3% decline in November, a much smaller decrease than previously reported.

At the same time, Americans’ incomes, which include wages, interest and government benefits, rose by 0.4% in December after being flat the month before.

With income growth outpacing spending, the nation’s personal savings rate--savings as a percentage of after-tax income--rose to 1% in December from 0.5% the previous month.

Separately, the Labor Department said new claims for unemployment benefits last week rose by a seasonally adjusted 30,000 to 390,000 following three straight weeks of declines.