U.S. Economy: Consumer Spending Slows, Claims Rise

Consumer spending in the U.S. increased at the slowest pace in six months and filings for unemployment insurance jumped, spurring bets that the Federal Reserve will need to keep reducing interest rates.

Purchases rose 0.2 percent in December after a 1 percent gain the month before, the Commerce Department said today in Washington. The Labor Department said jobless claims rose to a 27-month high last week, though the figures may have been distorted by adjusting for holidays, a spokesman said.

Treasuries advanced, stocks slid and odds that the Fed will cut rates another half-point to 2.5 percent by March rose to 68 percent, futures showed. Consumers, who have helped the economy weather the worst housing recession in a quarter-century, may further rein in spending after declines in home and stock values, gains in fuel costs and reduced access to credit, economists said.