Consumer spending increased 0.5% December at the fastest pace in three months, giving the economy some momentum going into 2017.
The Associated Press notes a Commerce Department report characterizes the increase as a major improvement over the modest 0.2% gain in November. It was the best showing since spending jumped 0.7% in September and was driven by a 1.4% surge in spending on durable goods, long-lasting items such as autos.
Incomes also showed some improvement, rising by 0.3% in December, spurred by a rebound in growth in wages and salaries.
Consumer spending is closely watched since it accounts for 70% of economic activity. Overall growth had slowed to a weaker-than-expected 1.9% gain in the October-December quarter because of a slump in exports. But economists are looking for a rebound in the current quarter.
With spending outpacing income growth in December, the saving rate dropped to 5.4% of after-tax incomes, down from 5.6% in November. It was the lowest saving rate since March 2015.
Economists believe that consumer spending will show solid gains in 2017, reflecting strong labor markets with unemployment down to near a nine-year low of 4.7% in December.
