MoreThe Commerce Department said personal consumption expenditures rose 0.4 percent in October, reversing a 0.4 percent decline in September. Personal income rose 0.1 percent last month.
October was the first month since July that consumer spending, which accounts for roughly two-thirds of U.S. economic activity, outpaced the rate of growth for personal income.
The spending gain was larger than Wall Street analysts had been expecting and may boost forecasts for fourth-quarter economic growth. Economists polled by Reuters before the report's release had expected both spending and income to grow by 0.2 percent in October.
The increase in October spending was the largest since July's 1.1 percent gain, a sign that consumers are easing their hold on the purse strings and may be less worried about the direction of the economy.
The fitfulness of the economic recovery since the start of the year, coupled with worries about a possible conflict with Iraq, have been a drag on consumer confidence.
But according to a release on Tuesday from the private Conference Board, a private business group, consumers' outlooks rebounded from a nine-year low in November.
In the Commerce report, consumer spending on durable goods -- items meant to last three or more years -- dipped 1.0 percent in October, their second straight decline and the first back-to-back decline since the last two months of 2001.
Expenditures for non-durables rose by 0.7 percent while spending for services gained by 0.5 percent.
In another sign consumer worries may be easing, the saving rate also fell in October. Saving as percentage of disposable income fell to 4.2 percent from 4.4 percent in September.
A measure of inflation in the report showed price pressures remained tame in October. The price index for spending -- a gauge favored by Federal Reserve policymakers for tracking inflation -- increased by 0.2 percent in October. It was up a smaller 0.1 percent excluding food and energy prices.
