WASHINGTON (AP) — Consumer spending fell for a record sixth straight month in December as recession-battered households, worried about surging layoffs, boosted their savings rates to the highest level since May.
Economists expect consumer spending, which accounts for the largest portion of total economic activity, to remain weak this year, prolonging an already painful recession.
The Commerce Department reported Monday that personal consumption spending dropped by 1 percent in December. That was slightly worse than the 0.9 percent decline economists expected.
Incomes, reflecting a wave of layoffs, fell for a third straight month, but the 0.2 percent drop was slightly better than expected.
Still, Americans worried about the possibility of more job cuts boosted their savings rate to 3.6 percent of their after-tax incomes in December. That was the highest level since tax rebate checks temporarily pushed the rate up to 4.8 percent in May.
For the year, consumer spending rose by just 3.6 percent, the smallest annual increase since 1961. Incomes rose by 3.7 percent, the weakest gain since a 3.2 percent advance in 2003.
The Federal Reserve will provide a reading of just how bad the credit crunch is later Monday with the release of its latest survey showing how many banks are tightening their lending standards for consumers and businesses.
Two other reports released Monday showed recessionary conditions persist in the construction and manufacturing sectors.
Construction spending fell by 1.4 percent in December, reflecting weakness in both residential and nonresidential building, according to the Commerce Department. For the year, construction activity was down a record 5.1 percent as home building plunged by 27.2 percent, the biggest annual decline on records that go back to 1993.
President Obama is pushing Congress to pass an $819 billion economic stimulus package that would include increases for government infrastructure projects such as highways and bridges.
Meanwhile, a key gauge of manufacturing activity edged up slightly in January but still showed contraction for the 12th straight month. The Institute for Supply Management said its manufacturing index rose to 35.6 in January from an all-time low of 32.9 in December. Any reading below 50 indicates contraction in the sector.
This program aired on February 2, 2009. The audio for this program is not available.