US consumer spending increased slightly faster than expected in January as consumers dipped into their savings amid a small rise in incomes, which could help sustain the economic recovery.
The Commerce Department said today that spending rose 0.5%, increasing for a fourth straight month, after advancing by an upwardly revised 0.3% in December. (Consumer spending in December was previously reported to have increased 0.2%.)
Analysts had expected consumer spending, which normally accounts for over two-thirds of US economic activity, to increase 0.4% in January.
Consumer spending has been held back by stubbornly high unemployment and analysts worry the economy's recovery from the most painful downturn since the 1930s could stumble in the second half of the year if spending remains lackluster.
Analysts said it would be difficult for consumers to spend more unless income growth improved.
The economy expanded strongly in the second half of 2009, driven by a sharp slowdown in the rate at which business liquidated inventories. Analysts expect stock rebuilding and continued improvement in business spending to support growth into the first half of 2010.
Consumer spending rose at a modest 1.7% annual rate in the fourth quarter from 2.8% in the prior period.
