(Corrects month in para 11 to December)

Consumer spending rose slightly less than expected in December as savings jumped to a six-month high, indicating that households remained too cautious to spend despite an improvement in incomes.

The Commerce Department said on Monday spending rose 0.2 percent after increasing by an upwardly revised 0.7 percent in November. Consumer spending in November was previously reported to have climbed 0.5 percent. It was the third straight monthly gain in spending.

Analysts polled by Reuters had expected consumer spending, which normally accounts for over two-thirds of U.S. economic activity, to rise 0.3 percent in December.

The December spending numbers were revised up, so the weaker numbers for January are not so bad, said Gary Thayer, chief macrostrategist at Wells Fargo Advisors, in St. Louis, Missouri.

U.S. stock index futures rose slightly after the data, while government bond prices were steady at lower levels.

For the whole of 2009, spending fell 0.4 percent, the largest drop since 1938.

Boosting consumer spending is critical to putting the economy on a sustainable recovery path, but a 10 percent unemployment rate is pressuring households.

The economy grew at a 5.7 percent annual pace in the fourth quarter, its fastest clip in six years, driven by a sharp slowdown in the rate at which businesses reduced stocks of unsold goods, the government said on Friday. Consumer spending slowed to a rate of 2 percent after rising 2.8 percent in the July-September period, the GDP report showed.

In December, spending adjusted for inflation edged up 0.1 percent after rising 0.4 percent the prior month. Personal income increased 0.4 percent in December after increasing 0.5 percent in November, the Commerce Department said.

That was a touch above market expectations for a 0.3 percent increase. For the whole of 2009, personal income dropped 1.4 percent, the largest fall since 1938.

Real disposable income climbed 0.3 percent in December after rising 0.3 percent in November. The rise in income saw savings rising to an annual rate of $534.2 billion, the highest level since June. The savings rate rose to 4.8 percent from 4.5 percent the prior month. For the whole of 2009, savings rose to a record $502.7 billion.

Commerce Department data also showed the personal consumption expenditures price index, excluding food and energy, rising 1.5 percent from a year ago in December. The index, which is a key inflation measure monitored by the U.S. Federal Reserve, increased 1.4 percent in November.

It suggests that the Fed still has some time to keep interest rates low. If inflation stays low, the only risk to Fed policy would be higher rates overseas, said Thayer.

The U.S. central bank left interest rates near zero last week and repeated a pledge to hold them low for an extended period.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Inflation