U.S. consumer spending dipped 2% in 2010 from 2009 as incomes fell 0.6%; Americans spent less on food, entertainment, eating out, charity, paid more for gas and health care

Cindy Allen

Cindy Allen

Sep 27, 2011 – Associated Press

WASHINGTON , September 27, 2011 () – Consumers earned less and spent less for a second straight year in 2010. The government report released Tuesday offered a deeper look at how Americans have adjusted their spending after the worst recession since the Great Depression.

People spent less last year on food, cut back on entertainment and eating out at restaurants and gave less to charity. At the same time, they paid more for gas and health care -- trends that have continued this year.

Total spending by consumers fell 2 percent last year, according to the Labor Department's annual survey of consumer behavior. It's only the second decrease since the government began the survey in 1984. The first came in 2009.

Incomes declined 0.6 percent in 2010, after a 1.1 percent drop in 2009.

This year, consumer spending and income have increased only modestly. High unemployment, meager pay increases and a spike in gas prices have slowed both.

Weak consumer spending has held back the overall economy, which barely grew in the first half of the year. Consumer spending accounts for 70 percent of growth.

Economists had hoped a Social Security tax cut would boost spending this year. It gave most families an extra $1,000 to $2,000 in take-home pay. However, that gain was offset by a sharp spike in global oil prices, which drove gasoline prices higher beginning in January.

The average price for a gallon of gas peaked in early May at nearly $4 -- almost a dollar more than the price per gallon at the beginning of the year.

Prices have come down a little since then but are still high. On Tuesday, the average price per gallon was $3.48, according to AAA.

A separate report Tuesday showed that the cost of employer-sponsored health insurance surged this year. Annual premiums for family coverage climbed 9 percent and surpassed $15,000 for the first time, according to the report released by the Kaiser Family Foundation and the Health Research and Education Trust. The 2010 increase for family coverage had been 3 percent.

Average household income before taxes fell to $62,481 in 2010, according to the report. That's down from $62,857 in 2009 and $63,563 in 2008.

Average annual expenditures dropped to $48,109. The average American household spent $49,067 in 2009 and $50,486 in 2008.

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