U.S. consumer spending rose less than expected in January as households took advantage of the largest increase in incomes in more than 1-1/2 years to rebuild.
The Commerce Department said spending edged up 0.2%, the smallest increase in seven months, after an upwardly revised 0.5% rise in December.
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Economists polled by Reuters had expected spending, which accounts for about 70% of U.S. economic activity, to rise 0.4% in January.
Real spending fell 0.1%, the first decline in a year, after rising 0.3% in December. The drop in real spending offered an early confirmation that spending would slow down.
Spending in the fourth quarter grew at a 4.1% annual rate, the fastest in more than four years.
Incomes rose 1.0% last month, the largest increase since May 2009, after increasing 0.4% in December. The increase in January outpaced economists expectations for a 0.4% rise.
The report also showed the Federal Reserves preferred measure of consumer inflation -- the personal consumption expenditures price index, excluding food and energy - edged up 0.1%.
In the 12 months through January, the core PCE index rose 0.8 percent after rising by the same margin in December .