Spending by U.S. consumers rose in September after dropping in August, but personal income growth slowed and savings levels dropped.

The U.S. Commerce Department said today that personal consumption rose 0.6%, after dropping by a revised 0.1% in August.

Personal income rose 0.2% after a revised 0.3% increase in August.

Meanwhile savings levels dropped. Personal saving as a percentage of disposable personal income was just 0.2% in September, the lowest savings rate since October of 2001 and well shy of the 0.7% rate a month earlier.

Inflation held steady as year-over year personal consumption expenditures less food and energy rose 1.5% in September from a year ago. The year-over-year climb in August was 1.4%. On a month-over-month basis, the index rose 0.1%.

In a separate release, the Institute for Supply Management said the U.S. factory sector continued to expand in October, although the rate of growth was slower than in September.

The ISM said that its October manufacturing business index fell to a reading of 56.8 from 58.5 in September. Any reading over 50 indicates expansion. A measure of new orders in the report nudged higher, moving to 58.3 from 58.1 in September, while the production index slipped to 58.9 from 61.6 and inventories fell to 48.2 from 51.0.

An employment gauge fell to 54.8 from 58.1 in September. The prices index showed that manufacturers are continuing to experience significant inflation pressures, ticking to 78.5 from 76.0.

Separately, U.S. construction spending was nearly unchanged in September, contrary to expectations for continued growth. Total construction spending was unchanged in September at seasonally adjusted annual rate of US$1.014 trillion, the Commerce Department said Monday. Economists had been expecting September spending would rise 0.5%. Residential construction fell 0.2%, the first decline in the category since February 2003.