Personal spending falls 0.5 percent in September

The Commerce Department said spending fell 0.5 percent, the largest decline since December, after an upwardly revised 1.4 percent increase in August. Consumer spending in August was previously reported to have advanced 1.3 percent.

September's decline was in line with market expectations. Consumer spending, which normally accounts for over two-thirds of U.S. economic activity, in August was bolstered by the popular "cash for clunkers" program that gave discounts on some new motor vehicle purchases.

The program, which ended in August, contributed to a jump in consumer spending in the third quarter and helped to pull the economy out of its worst recession since the 1930s.

Spending adjusted for inflation fell 0.6 percent in September, also the largest decline since December, after rising 1 percent the prior month, the Commerce Department said.

Personal income was flat last month after rising 0.1 percent in August. That was also in line with market expectations.

Real disposable income fell 0.1 percent in September. Despite the fall in income, Americans saved more money last month. Savings increased to an annual rate of $355.6 billion, lifting the saving rate to 3.3 percent from 2.8 percent in August.

Commerce Department data also showed the personal consumption expenditures price index excluding food and energy, a key inflation gauge monitored by the U.S. Federal Reserve, was up 1.3 percent from a year ago in September, matching the August increase.

Federal Reserve policymakers, who have cut interest rates to almost zero to aid growth and have said they expect to keep rates exceptionally low for an extended period.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)