Gloomy Christmas for US consumers

Shoppers are likely to spend less if unemployment gets worse, analysts say

US consumer spending slipped to a 15-month low in December as financial pressures hit households, official figures show.

The US Commerce Department said spending inched up 0.2% over the key Christmas shopping period. In November the spending growth rate hit 1%.

The figure is being seen as a further sign of the weakness of the US economy.

Figures released on Wednesday showed US economic growth has slowed sharply, and fears of a recession are growing.

Downturn

Higher lending costs, more expensive food and energy bills, and lower house prices are taking their toll on US consumers, who account for two thirds of the world's largest economy.

"Shoppers took a holiday from the malls in December," said Joel Naroff of Naroff Economic Advisers.

"In other words, 'drop shopping' not 'shop till you drop' was the catch phrase."

See how the US economy has fared since the last three months of 2003

Data out earlier in the week showed the US economy grew at an annual rate of just 0.6% from October to December.

This compared with the previous three months, between July and September, when the economy was growing at annual rate of 4.9%.

This compounded gloomy news from the International Monetary Fund this week.

It said in a report that even by the end of 2008, the US economy would still only be growing at a year-on-year rate of 0.8%.

The Federal Reserve, the US central bank, has sharply cut interest rates on two separate occasions over the past two weeks to try and prevent a recession.

And the White House is also working furiously to boost morale among consumers and businesses with a package - of tax incentives worth billions of dollars - which is currently being debated in the Houses of Congress.

A key report out on Friday showing job growth during January will be closely watched for signs of rising unemployment.

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