Consumer Income, Spending Rise in September  

U.S. consumer spending increased modestly in September as households boosted their savings and inflation remained benign, pointing to sluggish domestic demand.

The Commerce Department said on Friday consumer spending rose 0.2%after advancing 0.3% in August.

Economists polled by Reuters had expected consumer spending, which accounts for about 70% of U.S. economic activity, to gain 0.2% in September.

The data was included in Thursday's third-quarter gross domestic product report. Inflation stayed muted in September, a potential source of concern for Federal Reserve officials. A price index for consumer spending nudged up 0.1%, rising by the same margin for three consecutive months.

Over the past 12 months, prices rose 0.9%, the smallest advance since April. The index had increased 1.1%in August.

Excluding food and energy, the price index for consumer spending also rose 0.1% for a third straight month. Core prices were up 1.2% from a year ago, after rising by the same margin in August.

Both inflation measures continue to trend below the Fed's 2% target. That, combined with the lackluster consumer spending, would argue against the U.S. central bank trimming the $85 billion in bond purchases it is making each month to keep interest rates low.

In September, income rose 0.5% after rising by the same margin in August. With spending lagging income growth, the saving rate - the percentage of disposable income households are socking away - rose to 4.9%.That was the highest since December last year.