Personal income posts biggest gain in eight years

American incomes rose in December by the most in eight years, a positive sign for consumer spending that could help the economy sustain momentum early this year.

Personal income for Americans rose 2.6 percent last month, the Commerce Department said on Thursday. That was the biggest increase since December 2004 and well above analysts' expectations for a 0.8 percent gain.

Personal income rose in November and December, the Commerce Department said, because of special dividends and accelerated bonuses to beat increases in taxes this year.

The big rise in incomes suggests total consumer spending power entered the new year on stronger footing, even though much of the gains may not have been distributed evenly throughout the workforce.

The economy faces the threat of across-the-board spending cuts scheduled for March, as well as the possibility the government might default later this later year and trigger another recession.

After-tax income climbed 2.7 percent in December, the strongest since May 2008, while consumer spending rose 0.2 percent, just below the pace expected by analysts in a Reuters poll.

Excluding the one-off factors that boosted incomes in December, after-tax income rose 0.4 percent.

(Reporting by Jason Lange; Editing by Neil Stempleman)