U.S. consumer spending increased modestly in September as households boosted their savings and inflation remained benign, pointing to sluggish domestic demand.
The Commerce Department said on Friday consumer spending rose 0.2%after advancing 0.3% in August.
Economists polled by Reuters had expected consumer spending, which accounts for about 70% of U.S. economic activity, to gain 0.2% in September.
The data was included in Thursday's third-quarter gross domestic product report. Inflation stayed muted in September, a potential source of concern for Federal Reserve officials. A price index for consumer spending nudged up 0.1%, rising by the same margin for three consecutive months.
Over the past 12 months, prices rose 0.9%, the smallest advance since April. The index had increased 1.1%in August.
Excluding food and energy, the price index for consumer spending also rose 0.1% for a third straight month. Core prices were up 1.2% from a year ago, after rising by the same margin in August.
Both inflation measures continue to trend below the Fed's 2% target. That, combined with the lackluster consumer spending, would argue against the U.S. central bank trimming the $85 billion in bond purchases it is making each month to keep interest rates low.
In September, income rose 0.5% after rising by the same margin in August. With spending lagging income growth, the saving rate - the percentage of disposable income households are socking away - rose to 4.9%.That was the highest since December last year.