Consumer spending dips; incomes rise solidly

WASHINGTON (AP) -- Consumers, the lifeblood of the economy, trimmed their spending in December as free-financing offers for cars and other incentives began to wane. Incomes rose solidly.

The 0.2 percent drop in spending followed a revised 0.3 percent decline in November, a much smaller decrease than previously reported, the Commerce Department said Thursday.

Even with these modest declines, consumer spending, which accounts for two-thirds of all economic activity, held up well even as the country suffered through a recession that began in March and got another jolt by the Sept. 11 terror attacks.

In the fourth quarter, consumer spending rose by a surprisingly strong 5.4 percent, one of the reasons the economy was able to grow at a 0.2 percent rate during the period and defy expectations of another negative quarter.

Americans' incomes, which include wages, interest and government benefits, rose by a solid 0.4 percent in December, after being flat the month before.

The income and spending figures are not adjusted for inflation.