US consumer spending was unchanged in January, a government report showed today, and a sharper-than-expected pickup in inflation sparked fears the Federal Reserve may raise interest rates faster than expected.
The Commerce Department said personal income fell 2.3 per cent in January after hitting a record in December on a big dividend payout by Microsoft.
Excluding that one-time impact and other factors, personal income rose 0.5 per cent in January compared with a 0.6 per cent gain in December.
The price index for consumer spending, a measure of inflation, gained 0.2 per cent in January and rose 0.3 per cent when volatile food and energy prices were stripped out.
That's a sharp pick-up from December's flat readings and marked the biggest monthly increase in core prices since October 2001.
The Fed has raised rates six times since last June to head off inflation concerns, and has said it should be able to continue to increase borrowing costs at a "measured" pace.
Most analysts believe that implies quarter-percentage point rate hikes and markets are watching for data that could encourage policy-makers to be more aggressive.
Despite the uptick in inflation, economists said the income and spending side of the report was largely in line with expectations.
Wall Street had forecast personal income to decline 2.6 per cent following December's Microsoft-related boost, while consumer spending was seen up 0.1 per cent. When price rises were factored in, consumer spending was down 0.2 per cent, marking the weakest reading since June 2004.
The personal saving rate was 1 per cent in January, indicating that Americans were setting aside 1 cent from each dollar earned. That was down from 3.6 per cent in December.