Americans' incomes, spending rise in December

WASHINGTON (AP) -- Americans' incomes grew solidly in December, rising slightly faster than their spending as lower consumer confidence darkened their mood. Manufacturing activity plunged again in January, registering its lowest reading since 1991.

The Commerce Department reported Thursday that incomes, which include wages, interest and government benefits, rose by 0.4 percent in December, twice as fast as many analysts were predicting, and up from a 0.2 percent rise the month before.

Federal payments to farmers and retirees helped drive income higher. Wages grew by 0.2 percent in December, down from a 0.3 percent rise.

Spending, meanwhile, rose for the third straight month by 0.3 percent, slightly stronger than the 0.2 percent rise many analysts were forecasting. But December's increase was much smaller than the 0.8 percent gain posted in September.

In another report, the National Association of Purchasing Management said that its index of manufacturing activity fell to 41.2 in January. The last time manufacturing posted a reading that low was in March 1991.

A level below 42.7 generally indicates a contraction in the economy, said Norbert J. Ore, chairman of the NAPM. Thursday's number "corresponds to a -0.6 percent annual decrease in real gross domestic product", Ore said.

On Wall Street, the Dow Jones industrial average was up about 15 points after the first hour of trading Thursday but Nasdaq continued Wednesday's slide, dropping 10 points.

Consumer spending, which accounts for two-thirds of all economic activity, has been an engine of the economy's growth. But consumers have been tightening the belt, contributing to the economic slowdown.

The government reported Wednesday that the economy slowed to a growth rate of just 1.4 percent in the fourth quarter of 2000, the weakest performance in more than five years, as spending on cars, computers and other costly goods fell.

In another sign of the slowdown, the Labor Department reported Thursday that new applications for unemployment benefits rose by a bigger-than-expected 32,000 last week to 346,000.

While the weakening economy has really hurt some sectors, such as manufacturing, construction activity has remained stable, helped in part by cheaper borrowing costs.

Construction spending increased by 0.6 percent in December.