U.S. consumer spending was flat in December as households took advantage of the biggest rise in income in nine months to increase their savings, setting the stage for a slowdown in consumer demand in the first months of 2012. The Commerce Department said the December reading on spending was the weakest since June. Adjusted for inflation, December spending fell 0.1 percent, ending three consecutive months of gains.Spending, which accounts for 70 percent of U.S. economic activity, rose 0.1 percent in both November and October. For all of 2011, spending rose 4.7 percent, the biggest increase since 2007. The report highlighted the challenge facing the economy this year. Unless incomes grow more rapidly, consumers will be forced to reduce spending, which would slow growth and result in less hiring. Wages rose in December, helping to boost incomes. Income rose 0.5 percent, the biggest gain since a similar increase in March, and followed a 0.1 percent rise in November. Disposable income rose 0.3 percent after being flat the previous month. With disposable income outpacing spending, the savings rate rose to a four-month high of 4.0 percent from 3.5 percent in November. Savings increased to an annual rate of $460.1 billion, the highest since August, from $407.8 billion in November. The report showed inflation pressures generally contained, with a price index for personal spending rising 0.1 percent last month after being flat in November. In the 12 months through December, the index was up 2.4 percent-the smallest 12-month gain since April 2011-slowing from November's 2.6 percent rise.
