U.S. consumer spending in December weakest since 2009

Mon Feb 2, 2015 1:33pm EST
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By Lucia Mutikani

WASHINGTON (Reuters) - U.S. consumer spending recorded its biggest decline since late 2009 in December with households saving the extra cash from cheaper gasoline.

Other data on Monday showed factory activity cooled in January, suggesting the economy may have entered the new year on a slightly softer footing than had been expected.

Nevertheless, upbeat and cash-flush consumers are expected to step-up spending and buoy the economy this year.

"The consumer is poised to do well in early 2015. Lower gasoline prices are going to provide a big lift to consumption," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.

The Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, fell 0.3 percent after gaining 0.5 percent in November and 0.3 percent in October.

The drop, the largest since September 2009, reflected a decline in spending at service stations as gasoline prices fell, as well as weak auto receipts and weather-related softness in demand for utilities.

The spending data was included in Friday's fourth-quarter gross domestic product report, which showed the economy growing at a 2.6 percent annual pace, with consumer spending rising at a brisk 4.3 percent rate - the fastest since 2006.

Economists said fourth-quarter GDP growth is likely to be revised up to at least a 2.8 percent rate after another Commerce Department report on Tuesday showed stronger nonresidential construction spending in December than previously assumed.   Continued...

People shop during day after Christmas sales at Citadel Outlets in Los Angeles, California December 26, 2014. REUTERS/Jonathan Alcorn