CONSUMER SPENDING , INCOMES RISE IN THE MONTH OF MAY

WASHINGTON,--U.S. consumer spending rose slightly more than expected in May even as savings touched their highest level in eight months, a government report showed on Monday.

The Commerce Department said spending edged up 0.25% after being flat in April. Analysts polled by Reuters had expected consumer spending to rise 0.1%.

Consumer spending is being closely watched to gauge the strength of the economic recovery after the government lowered estimates for the first quarter, holding back gross domestic product growth during that period.

A government report on Friday showed consumer spending, which normally accounts for 70% U.S. economic activity, rose at a 3% pace in the January-March quarter -- slower than the 3.5% the government had estimated last month.

Spending adjusted for inflation increased 0.3% last month after being flat in April. Real spending on services increased 0.3%, while spending on goods rose 0.2%, reversing the prior month's 0.1% decline, the Commerce Department said.

Personal income increased 0.4% after gaining 0.5% in April. Markets had expected income to rise 0.5% last month.

Real disposable income climbed 0.5% following a 0.6% increase the prior month.

The saving rate rose to 4.0% from 3.8% in April. Savings increased to an annual rate of $454.3 billion, the highest level since September. The report also showed the personal consumption expenditures price index, excluding food and energy, rising 1.3% in the 12 months to May.

The index, a key inflation measure monitored by the Federal Reserve, increased 1.2% in April.