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US consumer spending rises, boosted by jump in services

Washington: US 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.

The Commerce Department said on Monday consumer spending increased 0.4 per cent after advancing by a revised 0.1 per cent in December. Spending was previously reported to have gained 0.4 per cent in December.

Economists polled by Reuters had forecast consumer spending, which accounts for more than two-thirds of US economic activity, edging up 0.1 per cent in January.

January’s increase in spending was driven by a 0.9 per cent 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 per cent in January.

Despite the services-driven rise in spending, inflation pressures remained muted.

A price index for consumer spending rose 0.1 per cent after increasing 0.2 per cent in December. Over the past 12 months, prices rose 1.2 per cent, compared to an advance of 1.1 per cent in December.

Excluding food and energy, the price index for consumer spending edged up 0.1 per cent, rising by the same margin for a seventh straight month. Core prices were up 1.1 per cent from a year ago, after rising 1.2 per cent in December.

Both inflation measures remain stuck below the Federal Reserve’s 2 per cent target.

When adjusted for inflation, consumer spending rose 0.3 per cent after falling 0.1 per cent in December. The rise in so-called real spending could boost first-quarter gross domestic product.

Income rose 0.3 per cent 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 per cent in January after falling 0.2 per cent 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 per cent in January. However, actual saving fell to its lowest level since March.