NEW YORK - U.S. consumer spending increased slightly faster than expected in January as consumers dipped into their savings amid a small rise in incomes, a government report showed on Monday.

KEY POINTS: * The Commerce Department said spending rose 0.5 percent, increasing for a fourth straight month, after increasing by an upwardly revised 0.3 percent in December. * Consumer spending in December was previously reported to have increased 0.2 percent. * Analysts polled by Reuters had expected consumer spending, which normally accounts for over two-thirds of U.S. economic activity, to increase 0.4 percent in January.

COMMENTS:

PIERRE ELLIS, SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK:

Consumer spending growth was very healthy in real terms. Income is not as soft as it looks. Wages and salaries portion, the key element, were up 0.4 percent. Sustainability of income growth is critical. Farm income depressed overall income, but that is subject to ups and downs because of subsidy programs. It does not reflect the health of the general economy.

The message is continuing progress for the economy, if not as fast as hoped, and that should keep the Fed content with the evolution of events. The core price index was flat so the concept of potential deflation, once again, is becoming less foreign. When the economy is slack, prices lose upward momentum.

BERNARD BAUMOHL, CHIEF GLOBAL ECONOMIST, THE ECONOMIC OUTLOOK GROUP LLC, PRINCETON, NEW JERSEY:

Consumers spending is improving. They will play a role in this recovery. This is very important since they contribute to 70 percent of the economy. Even though unemployment remains high, it has not had a big effect on consumer spending.

I am a bit concerned about the figures in February. We are downgrading our GDP forecast because of the massive snowstorm that hit last month. We should be prepared to see a setback for February and this will have an effect on slowing economic growth in the first three months of the year.

TIM GHRISKEY, CHIEF INVESTMENT OFFICER, SOLARIS ASSET MANAGEMENT, BEDFORD HILLS, NEW YORK:

Personal income was a weak number, probably reflecting the weakness we've seen in other employment data in January, which may be related to the storms that we've had. On the other hand personal spending picked up and was a bit better than expected, while the PCE inflation data showed a lack of any acceleration and a very low inflation rate. Overall, the market isn't reacting to these numbers, the premarket isn't. The personal income is the weak number, but that issue seems to have been discussed.

DAVID COARD, HEAD OF FIXED INCOME SALES AND TRADING, WILLIAMS CAPITAL GROUP, NEW YORK:

Income was not quite as good as people were looking for. They also revised the previous month downward. I don't know that people are going to focus too much on that -- most of the movement in Treasuries over the weekend is a result of renewed speculation that Greece is going to be saved.

SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES & ASSOCIATES, ST PETERSBURG, FLORIDA:

The income figure maybe was a little bit light.

You can talk about confidence all day, but if the consumers don't have money they won't be able to spend it.

WAYNE KAUFMAN, CHIEF MARKET ANALYST, JOHN THOMAS FINANCIAL, NEW YORK:

I think this is a non-event. It was pretty much as expected, though personal income was a little off. Not sure its meaningful. The only thing that's important is the jobs data at the end of the week.

This won't have an impact on trading, I think we'll follow through on last week's rebound. We're moderately bullish and everyone is looking to the payroll report to see what's next.

TODD LEONE, HEAD OF LISTED TRADING, COWEN & CO., NEW YORK:

(Stock) futures didn't move at all. That tells you that (the numbers) were in line with what people were expecting. But they're not bad. We've just been in such a tight range in this market, it's hard to get it moving.

MARKET REACTION: STOCKS: U.S. stock index futures hold gains BONDS: U.S. Treasury debt prices hold flat DOLLAR: U.S. dollar holds gains

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