US consumer spending, incomes rise; inflation slumps

US consumer spending and incomes rose in January as a decline in consumer prices picked up speed, Commerce Department data released Monday showed.

Consumer spending, which drives about 70 percent of the economy's activity, rose 0.3 percent in January, rebounding from a slight 0.1 percent dip in December, according to data adjusted for price changes. Without the price adjustments, spending fell 0.2 percent.

Personal income rose 0.3 percent for the second month in a row. However in January, wages and salaries, the lion's share of income, jumped 0.6 percent after a 0.1 percent rise the prior month.

Americans socked away more money in January as disposable personal incomes grew. The personal saving rate, a percentage of disposable personal income, rose a half percentage point to 5.5 percent.

"The American consumer is starting the year off on a fairly positive note," said Jennifer Lee, senior economist at BMO Capital Markets.

Lee said stronger job growth, which boosted wages and salaries and, thus, personal incomes, "gave consumers more support for some saving, and some spending."

Inflation continued to weaken amid declines in food and, most of all, energy prices, down 10.4 percent as crude oil prices fell. The personal consumption expenditures price index slid 0.5 percent in January, accelerating from a 0.2 percent drop in December.

Excluding food and energy, core PCE prices, the Federal Reserve's preferred inflation measure, edged up 0.1 percent in January after a nearly flat increase in the prior month and was up 1.3 percent year-over-year. The Fed's longer-term inflation target is 2.0 percent.