U.S. consumer spending rose less than expected in September as income fell for the first in more than a year, while inflation remained muted, reinforcing views the Federal Reserve will further ease monetary policy.
The data was among the last batch before the Fed's policymakers gather on Tuesday and Wednesday to assess the economy and its stuttering recovery from the worst recession since the Great Depression.
The Commerce Department on Monday said spending rose 0.2 percent after increasing 0.5 percent in August. Analysts polled by Reuters forecast spending, which accounts for about 70 percent of U.S. economic activity, rising 0.4 percent in September.
While the data was included in Friday's advance third-quarter gross domestic product report, analysts said it underscored the loss in momentum as the quarter ended.
"This bodes for tame spending," said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut.
U.S. stock index futures briefly trimmed gains after the income data, while Treasury debt prices extend gains. The U.S. dollar was little changed.
Expectations that the U.S. central bank would inject more money into the economy through bond purchases were bolstered by the report, which also showed no inflation pressures in the economy.
The Fed's preferred measure of consumer inflation -- the personal consumption expenditures price index, excluding food and energy - was flat in September for the first time since April. The index rose 0.1 percent in August.
In the 12 months through September, the core PCE index increased 1.2 percent, the smallest increase since September 2001, after increasing 1.3 percent in August.
"The Fed's focus on inflation and quantitative easing was reflected by today's PCE deflator number, which continues to head down to historical lows," said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey.
Fed officials are widely expected to announce a second round of bond buying at the end of their meeting on Wednesday to spur the economic recovery.
The economy grew at a sluggish 2 percent annual pace in the third quarter after expanding 1.7 percent in the prior period, driven by a large accumulation in business inventories and an acceleration in consumer spending.
The central bank, which cut overnight interest rates to near zero in December 2008, has already bought about $1.7 trillion worth of Treasury and mortgage-related debt.
Spending in September was held back as income fell 0.1 percent, the first decline since July 2009, after rising 0.4 percent in August. Economists had expected income to gain 0.2 percent in September.
Spending adjusted for inflation edged up 0.1 percent after increasing 0.3 percent in August.
With spending exceeding the 0.2 percent decline in disposable income, the saving rate edged down to 5.3 percent from 5.6 percent in August. Savings slipped to an annual rate of $607.6 billion.
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