US consumer spending rises 0.7 per cent

WASHINGTON, Mar 28 (Reuters): United States (US) consumer spending rose slightly more than expected in February for the eighth straight month of gains as households tapped their savings, government data showed Monday, while inflation accelerated at its fastest pace since June 2009. The Commerce Department said spending rose 0.7 per cent after an upwardly revised 0.3 per cent gain in January. Economists polled by Reuters had expected spending, which accounts for about 70 per cent of U.S. economic activity, to advance 0.6 per cent in February after a previously reported 0.2 per cent rise. Spending adjusted for inflation increased 0.3 per cent last month after being flat the prior month. After increasing at its fastest clip in four years in the final three months of 2010, consumer spending is expected to slow in the first quarter, with rising energy and food prices stealing from spending on other goods and services. Spending grew at a 4.0 per cent annual rate in the fourth quarter, helping to lift overall economic growth to a 3.1 per cent pace during the quarter from 2.6 per cent in the July-September period. High food and energy prices pushed up overall inflation last month. The Commerce Department said the personal consumption expenditures price (PCE) index rose 0.4 per cent, the fastest since June 2009, after gaining 0.3 per cent in January The Federal Reserve's preferred measure of consumer inflation -- the core PCE index excluding food and energy -- increased 0.2 per cent after rising by the same margin in January. In the 12 months through January, the core PCE index rose 0.9 per cent, the fastest rise in four months, after rising 0.8 per cent in January. The Federal Reserve so far views the high food and energy prices as transitory, but Chairman Ben Bernanke said he would act to ensure an inflationary psychology does not take root. Incomes rose 0.3 per cent last month after rising 1.2 per cent in January. That compared with economists' expectations for a 0.4 per cent gain. With consumption outpacing the growth in incomes, savings fell to $676.7 billion from $710.5 billion in January.