U.S. consumer spending posts modest gain in December

The numbers: Americans modestly raised spending in December to cap off a decent holiday shopping season, but the increase in 2019 was the smallest in three years and points to slower economic growth in the months ahead.

A key measure of inflation, meanwhile, accelerated to the highest rate of the year, though it’s still quite low.

Consumer spending advanced 0.3% last month, the government said Friday, matching the MarketWatch forecast. Incomes rose a smaller 0.2%.

That’s a big turnaround from last year, when consumer spending slumped almost 1% amid a partial government and brief worries about the threat of recession. Still, it wasn’t a particular strong finale for 2019.

The rate of inflation, for its part, also picked up. The PCE inflation index rose 0.3% last month, marking the biggest increase since last April.

The yearly rate of inflation also rose to a one-year high of 1.6%, though it’s still below the Federal Reserve’s 2% target.

What happened: Americans spent more on prescription drugs and health care in December. They spent less on new cars and trucks and utilities during a warmer than usual month.

Income growth, for its part, was depressed by a big decline in the earnings of farmers, part of which reflected lower government subsidies.

A separate measure of inflation that strips away food and energy, known as core PCE, rose 0.2% in December. They yearly rate edged up to 1.6% from 1.5%.

The savings rate dipped to 7.6% from 7.8%, but Americans saved the most in 2019 in seven years.