10:42 AM EST, 02/28/2025 (MT Newswires) -- Consumer spending unexpectedly declined last month, while the Federal Reserve's preferred inflation metric decelerated at the annual level, government data showed Friday.

Personal consumption expenditures decreased 0.2% in January following a 0.8% gain the month before, the Bureau of Economic Analysis said in a report. The Bloomberg-polled consensus called for a slowdown in spending growth to 0.2%.

Goods spending turned negative last month, at 1.2% as outlays on durables and nondurables contracted. Services spending growth slowed down to 0.3% from 0.7% on a monthly basis.

"One-off factors, such as the wildfires in California and inclement weather, may have contributed to the slower pace of spending at the start of the year," TD Economics Economist Ksenia Bushmeneva said in a note. "This suggests a potential bounce-back in spending in the coming months."

The annual headline PCE price index moved down to 2.5% growth in January, meeting the Street's forecast, from 2.6% in December. Inflation held steady on a sequential basis at 0.3% last month, in line with the market estimate.

The Fed's preferred core measure, which excludes food and energy, decelerated to 2.6% in January from 2.9% the month before. Sequentially, the core measure accelerated to a 0.3% gain from a 0.2% rise. Both figures were in line with analysts' expectations.

"Broadly speaking, US households remain in good financial shape, supported by a still healthy labor market and a significant wealth cushion," Bushmeneva said. "As long as this remains the case, we expect real consumer spending to stay resilient this year, with growth moderating to around 2%."

However, consumer sentiment has deteriorated in recent months amid political uncertainty, while US President Donald Trump's tariff plans has led to a significant increase in year-ahead inflation expectations, Bushmeneva said.

Last week, final results from the University of Michigan's Surveys of Consumers showed that year-ahead inflation expectations hit the highest levels since November 2023 as sentiment slumped this month.