US consumer spending beats expectations in January; inflation rises further

The rebound in spending could further temper expectations for a sharp slowdown in economic growth in the first quarter

U.S. consumer spending increased more than expected in January, but price pressures continued to mount, with annual inflation surging at rates experienced four decades ago.

The Commerce Department said on Friday consumer spending, which accounts for more than two-thirds of U.S. economic activity, surged 2.1% last month after falling 0.8% in December.

Economists polled by Reuters had forecast consumer spending rebounding 1.5%.

Consumer spending is being supported by massive savings and strong wage growth amid a tightening labor market. That is offsetting a reduction in government money to households.

The rebound in spending could further temper expectations for a sharp slowdown in economic growth