U.S. consumers cut spending for a sixth straight month in December and their incomes shrank, according to a government report on Monday that underscored the rapid deterioration in the economy.
The Commerce Department said spending decreased by 1.0 percent after falling by a revised 0.8 percent in November. That figure was previously reported as a 0.6 percent drop. Incomes fell by 0.2 percent after November's 0.4 percent decline, previously reported as a 0.2 percent decline.
"There is nothing encouraging in this report at all," Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York, said in a note to clients.
"With incomes falling…and confidence shattered, we have to expect spending to keep falling for some months yet," he said.
Analysts polled by Reuters had forecast spending falling by 0.9 percent and incomes slipping 0.4 percent.
For the whole of 2008, spending rose 3.6 percent, the smallest increase since 1961. Incomes increased 3.7 percent, the smallest advance since 2003.
The data was included in last week's gross domestic product numbers and had little impact on the markets, although Treasury debt prices gained modestly.
Data last week showed the economy shrank at its fastest pace in nearly 27 years in the fourth quarter, led down by steep contractions in consumer and business spending.
The economy's collapse is keeping inflation pressures muted. The overall personal consumption expenditures price index rose 0.6 percent on a year-over-year basis in December from 1.4 percent in November.
Excluding food and energy, the rise in the index slowed to 1.7 percent after gaining 1.9 percent in November. On a monthly basis, core prices were flat for a third straight month in December.
The deepening housing-led recession has seen households saving more money. Personal savings surged in December to 3.6 percent of disposable income from 2.8 percent in November, the highest rate since May 2008.
"If people start saving more they will be spending less, so the downturn will be more severe and long lasting," said Scott Brown, chief economist with Raymond James and Associates in St. Petersburg, Florida.
