U.S. consumer spending rose less than expected in January as households took advantage of the largest increase in incomes in more than 1-1/2 years to rebuild their savings, government data showed on Monday.

The Commerce Department said spending edged up 0.2 percent, the smallest increase in seven months, after an upwardly revised 0.5 percent rise in December. It was still the seventh straight month of gains.

Economists polled by Reuters had expected spending, which accounts for about 70 percent of U.S. economic activity, to rise 0.4 percent in January.

Real spending fell 0.1 percent, the first decline in a year, after rising 0.3 percent in December. The drop in real spending offered an early confirmation that spending would slow down after rising sharply in the last three months of 2010. Spending in the fourth quarter grew at a 4.1 percent annual rate, the fastest in more than four years.

Incomes rose 1.0 percent last month, the largest increase since May 2009, after increasing 0.4 percent in December. The increase in January outpaced economists' expectations for a 0.4 percent gain. Savings jumped to $677.1 billion, the highest level since August, from $620.9 billion in December.

The report also showed the Federal Reserve's preferred measure of consumer inflation -- the personal consumption expenditures price index, excluding food and energy - edged up 0.1 percent last month, after being unchanged in December.

In the 12 months through January, the core PCE index rose 0.8 percent after rising by the same margin in December .