U.S. consumer spending rose more than expected in January as outlays on services recorded their largest increase since late 2001, likely driven by demand for heating.
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The Commerce Department said on Monday consumer spending increased 0.4 percent after advancing by a revised 0.1 percent in December. Spending was previously reported to have gained 0.4 percent in December.
Economists polled by Reuters had forecast consumer spending, which accounts for more than two-thirds of U.S. economic activity, edging up 0.1 percent in January.
January's increase in spending was driven by a 0.9 percent jump in services, the biggest gain since October 2001. That likely reflected a increase in demand for utilities as Americans tried to keep warm during an unusually cold spell.
With households spending more on utilities, outlays on goods fell 0.6 percent in January.
Despite the services-driven rise in spending, inflation pressures remained muted.
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A price index for consumer spending rose 0.1 percent after increasing 0.2 percent in December. Over the past 12 months, prices rose 1.2 percent, compared to an advance of 1.1 percent in December.
Excluding food and energy, the price index for consumer spending edged up 0.1 percent, rising by the same margin for a seventh straight month. Core prices were up 1.1 percent from a year ago, after rising 1.2 percent in December.
Both inflation measures remain stuck below the Federal Reserve's 2 percent target.
When adjusted for inflation, consumer spending rose 0.3 percent after falling 0.1 percent in December. The rise in so-called real spending could boost first-quarter gross domestic product.
Income rose 0.3 percent in January after being flat the prior month. The expiration of jobless benefits for more than one million long-term unemployed people at the end of December had curbed income growth.
Income at the disposal of households after adjusting for inflation rose 0.3 percent in January after falling 0.2 percent the previous month.
With spending a touch above income growth, the saving rate, the percentage of disposable income households are socking away,
was unchanged at 4.3 percent in January. However, actual saving fell to its lowest level since March.