U.S. consumer spending fell in January for the second straight month due in part to the drop in gasoline prices, though inflation-adjusted outlays climbed.

Personal spending, which measures outlays for everything from washing machines to manicures, fell a seasonally adjusted 0.2% from the prior month, the Commerce Department said on Monday, only the second such decline since January 2014.

Personal income, reflecting money collected from wages, investments and government aid, increased 0.3%. Real disposable income, which accounts for taxes and inflation, rose 0.9% in January.

The overall tone of this report was encouraging as the relatively strong start to real spending activity in January will support the underlying narrative of sustained positive momentum in the U.S. economy, said TD Securities analyst Millan Mulraine.

Economists surveyed by The Wall Street Journal had forecast a 0.1% decline in household outlays and a 0.4% rise in personal income. December spending was unchanged from the initially estimated 0.3% decline.

Consumer spending accounts for about 70% of economic output in the U.S. and a persistent slowdown in consumer spending could restrain the broader economy.

Americans appear to be holding on to the money they aren’t spending at the pump. Americans’ savings rate rose to 5.5% in January from 5.0% the prior month. January’s reading was the highest since December 2012.

Separate figures out Thursday indicated U.S. households boosted spending at a 4.2% pace during the final three months of 2014, a touch slower than initially reported but still the most in four years.

Cheaper oil has been one reason for a brighter consumer outlook. But retail sales in January and December were surprisingly weak, the latest evidence consumers aren’t using the windfall from cheaper gasoline to fill their shopping carts.

Household spending fell for the second straight month in January. Spending on nondurable goods, a category that includes day-to-day items such as clothes, food and gasoline, dropped 2.2%. Durable goods purchases fell 0.1% from a month earlier. Spending on services increased 0.5%.

Job gains have improved the outlook for households. U.S. employers added 1 million jobs over the three months through January.

Monday’s report said wages and salaries were up 0.6% from a month earlier and 5.1% from a year earlier. A separate report last week showed Americans’ inflation-adjusted wages posted the largest gain in more than six years in January.

Wages have been one missing piece of the economic puzzle through most of the recovery, but that may be changing as unemployment falls and the labor market tightens.

Still, inflation remains muted.

The price index for personal consumption expenditures, the Federal Reserve’s preferred inflation measure, fell 0.5% from December. The inflation measure is down 0.2% from a year earlier. Excluding volatile food and energy components, so-called core prices were up 1.3% over the year.

Another measure of U.S. consumer prices fell in January for the first time in more than five years, the Labor Department said last week.

Monday’s report showed U.S. inflation remained below the Fed’s annual 2% target for the 33rd consecutive month.

Fed officials are looking past what they view as a temporary drop in energy prices when plotting their next monetary policy moves. And Fed Chairwoman Janet Yellen noted last week in her semiannual testimony to Congress that labor market slack is diminishing.

We have seen improvement, and if we continue to see improvement, it would add to my confidence, especially as the impact of oil prices diminishes over time, that inflation will be back up, Ms. Yellen told the Senate Banking Committee.

(END) Dow Jones Newswires

March 02, 2015 09:36 ET (14:36 GMT)