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Consumer spending fizzles in December, savings up

Monday, January 30, 2012

(Reuters) - Consumer spending was flat in December as households took advantage of the largest rise in income in nine months to boost their savings, setting the tone for a slowdown in demand early in 2012.

It was the weakest reading on spending since June, the Commerce Department said on Monday. Economists had expected consumer spending, which account for more than two-thirds of U.S. economic activity to nudge up 0.1 percent, the same as in November.

For all of 2011, spending rose 4.7 percent, the largest increase since 2007.

"Despite the healthy gains in income, U.S. consumers appear to have rediscovered a new sense of frugality," said Millan Mulraine, an economist at TD Securities.

When adjusted for inflation, spending dipped 0.1 percent, breaking three straight months of gains. It increased 0.1 percent in November.

The government reported on Friday that consumer spending grew at a 2.0 percent annual pace in the fourth quarter, helping to lift gross domestic product 2.8 percent - an acceleration from the third-quarter's 1.8 percent rate.

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