Americans increased their spending 0.4% in December, a solid pace but slower than the big spending burst seen in November.

The Associated Press reported that the Commerce Department said Monday (Jan. 29) the spending gain followed a 0.8% surge in November. Incomes were up 0.4%, helped by a healthy rise in wages that reflects the fact that unemployment is at a 17-year low of 4.1%.

A key inflation gauge tracked by the Federal Reserve was up a tiny 0.1 percent in December. It has risen 1.7% over the past 12 months, still below the Fed’s 2% inflation goal.

Consumer spending is closely watched because it accounts for 70% of economic activity. Strong spending helped support overall economic growth of 2.6% in the fourth quarter.

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