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Savings rate hits highest level in four months as incomes rise

The December savings rate reached 4% of disposable personal income, which increased 0.5% from November. Personal consumption expenditures last month declined 0.1%.

January 31, 2012|By Tiffany Hsu, Los Angeles Times

Consumers had more money in their pockets in December, but instead of spending it all they tucked away some of it in their savings.

Personal incomes rose $61.3 billion, or 0.5%, to $13.1 trillion in December from November, the highest month-to-month jump in nearly a year, according to the Commerce Department. The increase was fueled in part by rising wages and salaries.

But personal consumption expenditures last month dipped $2 billion, or 0.1%, to nearly $10.9 trillion in an about-face from November.

The savings rate, meanwhile, rose to $460.1 billion, or 4% of disposable personal income — the highest rate in four months and the largest monthly leap since April 2010.

The trend toward mattress-stuffing has raised concerns about slumping demand for goods and services in the future. Consumer spending makes up roughly two-thirds of the country's economic activity.

The U.S. gross domestic product — the value of all goods and services produced — fell short of expectations for the fourth quarter, rising at a 2.8% annualized rate instead of the 3% that many analysts had expected.

Though the rate was a vast improvement from the 1.8% growth in the previous quarter, analysts said the increase resulted mostly from bolstered inventories rather than sales.

Raising concerns about the slowly recovering economy, the Federal Reserve last week said it would likely keep its benchmark interest rate low through 2014.

Spending habits for 2011, however, tell a different story. Americans spent 4.7% more last year than they did in 2010. Several other economic indicators hint at potential spending increases down the line.

Consumer confidence in the economy is at its highest point since May, Gallup said last week. And the national unemployment rate in December fell to 8.5%, its lowest level in nearly three years.

tiffany.hsu@latimes.com

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