Consumer spending slowed down in December and the Commerce Department said it was the weakest since June. Economists were expecting a 0.1% increase in December. Consumer spending jumped 4.7% for all of 2011, the biggest increase since 2007. Consumer spending its one of the closest watched data points because it makes up more about 70% of the U.S. economy. When adjusted for inflation, consumer spending actually dipped 0.1% last month. This snaps a three-month streak of gains.
Wages fared better than consumer spending last month. Income saw a nice jump last month rising 0.5%, the largest gain since March. Analysts were expecting an income increase of 0.4%. Many people took advantage of the income jump to build up their savings.
One area of the economy that has been doing well lately is motor vehicles. The last three months of 2011 saw a big increase in vehicle purchases and car companies have been scrambling to restock their inventories.
Growth was hampered last quarter and the whole year as cuts in annual government spending and poor home sales held the economy down. Unemployment continues to be a problem as well despite the unemployment rate falling.
2012 looks to be slightly better. The Federal Reserve is estimating a 2.5% growth for the year. Economists see income as the biggest question mark moving forward. Income will need to rise more in order to support stronger spending which will in turn grow the economy faster. Many analysts believe the economy will continue to grow at a slow rate in 2012.