Household income trending up, boost for spending

Thu Mar 29, 2012 9:30am EDT
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WASHINGTON (Reuters) - Household income grew at a faster pace in the fourth quarter than previously thought, which should help underpin spending this quarter.

The Commerce Department said on Thursday personal income increased to a seasonally adjusted annual rate of $13.162 trillion, $3.3 billion more than reported last month, likely reflecting the strengthening labor market.

Growth in disposable income was $10.6 billion more than previously estimated.

While the government's final estimate left gross domestic product growth at an unrevised 3.0 percent pace last quarter, when measured from the income side, output increased at a 4.4 percent rate.

That was the fastest rise in gross domestic income since the first quarter of 2010 and followed a 2.6 percent rise in the third quarter.

"The data paints a clear picture of an economy that built momentum throughout the course of the year, closing on a high note," said Jim Baird, chief investment strategist for Plante Moran Financial Advisors in Kalamazoo, Michigan.

The department also said after-tax profits increased at a 1.1 percent rate, slowing from 2.7 percent the prior quarter. The slowdown in profits reflects the increase in wage costs as companies step up hiring.

Rising incomes should help to cushion consumer spending against surging gasoline prices. Spending, which accounts for about 70 percent of U.S. economic activity, grew at an unrevised 2.1 percent pace in the fourth quarter.

Other data on Thursday showed initial claims for state unemployment benefits fell 5,000 to a seasonally adjusted 359,000, the lowest level since April 2008, the Labor Department said on Thursday.   Continued...

Shoppers look at washers and dryers at a Home Depot store in New York, July 29, 2010. REUTERS/Shannon Stapleton