Spending, income up as ’12 ends

Early dividends, bonuses help advance earnings 2.6%, most since ’04

Customers shop for clothes at an H&M store in Atlanta in December. Household purchases rose 0.2 percent in December, the Commerce Department said Thursday.

Customers shop for clothes at an H&M store in Atlanta in December. Household purchases rose 0.2 percent in December, the Commerce Department said Thursday.

Friday, February 1, 2013

— Consumer spending in the U.S. climbed in December as incomes grew by the most in eight years.

Household purchases, which account for about 70 percent of the economy, rose 0.2 percent after a 0.4 percent gain the prior month, the Commerce Department said Thursday. Incomes rose 2.6 percent, pushing the saving rate up to a more than three year high.

Lower fuel costs, job gains, Christmas-season discounts and early dividend payouts helped to accelerate Americans’ spending last quarter, even as a plunge in defense outlays and slower stockpiling led the economy to contract at a 0.1 percent annual pace. An increase in taxes that began to shrink paychecks last month will pose a hurdle to sustaining gains in purchases.

“Consumers closed out the year on a relatively strong note,” said Guy Berger, an economist at RBS Securities Inc. in Stamford, Conn. “We have a fair amount of resilience in demand. But, this quarter doesn’t look great for spending as there will be some intense head winds.”

Claims for unemployment benefits increased more than forecast last week, partially erasing a slide in the prior two weeks and reflecting the difficulty of adjusting the figures for swings at the start of a year, the Labor Department reported Thursday. Initial jobless claims rose 38,000 to 368,000.

Most economists weren’t concerned by the increase.

“This just reverses some of the previous sharp falls without altering the gradual downward trend,” said Paul Dales, an economist at Capital Economics.

The government is scheduled to issue its January jobs report today. Analysts forecast that it will show employers added 155,000 jobs, the same as in December. The unemployment rate is expected to remain at 7.8 percent.

The gain in income in December was the biggest since December 2004, the month Microsoft Corp. paid a special dividend. The November reading was revised to show a 1 percent increase from a previously reported 0.6 percent advance.

The saving rate, recorded in the consumer spending report, increased to 6.5 percent, the highest since May 2009, from 4.1 percent. Wages and salaries increased 0.6 percent.

Disposable income, or the money left over after taxes, climbed 2.8 percent after adjusting for inflation, the biggest gain since May 2008.

After-tax income rose at a 6.8 percent annual rate from October through December, the biggest increase since the second quarter of 2008, a report showed Wednesday.

In addition to improving wages and salaries, some companies paid dividends and employee bonuses earlier than usual before tax rates went up this year.

The Commerce Department estimated that about $26.4 billion of the increase in incomes last quarter was attributable to early dividend payments and another $15 billion reflected bonuses and other types of irregular pay.

That signals the surge in incomes last quarter will be reversed in the first three months of 2013, when those payments took place in prior years.

Information for this article was contributed by Shobhana Chandra and Kristy Scheuble of Bloomberg News and Christopher S. Rugaber and Martin Crutsinger of The Associated Press.

Business, Pages 29 on 02/01/2013