WASHINGTON - Buffeted by soaring fuel prices and tighter credit, consumers increased their spending at the weakest pace in six months. In another sign of trouble, unemployment-benefit applications last week rose by the largest number since Hurricane Katrina.
The Commerce Department reported Thursday that consumer spending increased just 0.2 percent in December -- the year's peak shopping season. That was down sharply from a 1 percent gain in November. It was the weakest performance in this area since a similar 0.2 percent rise last June.
Meanwhile, the Labor Department said the number of laid-off workers filing for unemployment benefits increased by 69,000, to 375,000, last week. That was the highest level since the week of Oct. 8, 2005, when the economy was dealing with disruptions from Hurricane Katrina and other Gulf Coast hurricanes.
The increase in jobless claims was more than triple what economists had been expecting, although part of it was blamed on difficulties in adjusting the figures around the Martin Luther King Jr. holiday. Analysts said the greater concern was the slowdown in spending, which they predicted would continue in the current quarter, the period many believe will be the maximum danger point for a recession.
Despite widespread discounting, retailers slogged through their weakest Christmas sales season in five years as consumer confidence was shaken by the deep slump in housing, a severe credit squeeze and last year's big increases in the cost of gasoline and other energy products.