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Consumer Spending Increases

01/31/2011
The Commerce Department reports today that Americans increased their spending sharply in December 2010, representing the sixth straight monthly increase. In fact, consumer purchases for all of 2010 rose 3.5 percent, the fastest pace in three years and the best performance since a 5.2 percent rise in 2007, prior to the start of the recession.

Incomes also rose 3 percent in 2010, after having fallen 1.7 percent in 2009. Economists expect a slowly improving job market and a payroll tax cut to boost spending even further in 2011. This will give the economy a boost since consumer spending accounts for 70 percent of total economic activity.

For all of 2010, the economy grew 2.9 percent, the best performance since 2005. That's a sharp contrast to the 2.6 percent drop in GDP in 2009, the worst decline in more than 60 years.

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