WASHINGTON — Consumer spending rose more than forecast in December, capping its strongest quarter in more than four years.

Purchases, which account for about 70 percent of the economy, increased 0.7 percent after climbing 0.3 percent the prior month, Commerce Department figures showed Monday. Incomes increased for a third month, and the Federal Reserve’s preferred measure of inflation advanced at the slowest pace on record.

Households are driving demand at companies from Coach Inc. to Ford Motor Co. and bolstering the recovery. The economy needs even faster growth to reduce unemployment, which is projected to average more than 9 percent this year, one reason that Fed policymakers are pushing ahead with a second round of monetary stimulus worth $600 billion.

“We ended the quarter on a firmer note,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York, who correctly forecasted the gain in spending. “We are going to see continued healthy spending in 2011. The inflation numbers are very tame. The Fed is going to stay right where they are.”

The median estimate of 67 economists surveyed by Bloomberg News had called for a 0.5 percent advance in spending in December after a previously reported 0.4 percent gain in November.

Incomes climbed 0.4 percent for a second month, matching the median forecast in the Bloomberg survey.

Wages and salaries increased 0.3 percent after a 0.1 percent gain in November.

Disposable income, or the money left over after taxes, increased 0.1 percent after adjusting for inflation. It climbed 0.2 percent in the prior month.

The savings rate decreased to 5.3 percent, the lowest level since March, from 5.5 percent the prior month.

Inflation slowed further below the central bank’s long-term forecast. The Fed’s preferred price index, which is tied to spending patterns and excludes food and fuel, increased 0.7 percent from December 2009, the smallest increase since records began in 1959.

The central bank’s long-term goal is for inflation of 1.6 percent to 2 percent. The lack of price pressures is allowing the Fed to maintain quantitative easing to spur growth.

On Friday, the Commerce Department reported that the economy accelerated in the fourth quarter at a 3.2 percent annual pace,. Consumer spending climbed at a 4.4 percent rate, the most since the first three months of 2006.

Retailers’ 2010 holiday sales jumped 5.5 percent for the best performance in five years, according to MasterCard Advisors’ SpendingPulse. Demand for clothing and jewelry helped sales at chains from Macy’s to Tiffany & Co.

Demand for automobiles also drove spending. Car sales in December rose to a 12.53 million unit annual pace, the best since the government’s cash-for-clunkers program in August 2009, industry data showed.

Ford, the second-largest U.S. automaker, reported Friday that its U.S. sales climbed 15 percent in the fourth quarter and said profit-sharing checks for its 40,600 U.S. hourly workers will average $5,000, the highest since 2000.

Demand from affluent Americans helped profit at Coach, the largest U.S. maker of luxury leather handbags, jump 26 percent in the second quarter. The New York-based chain introduced new bags more frequently in the holiday season, and North America same-store sales were “exceptional,” Chief Executive Officer Lew Frankfort said last week.

Shoppers may have more money to spend after the Obama administration and Congress agreed in December to extend Bush-era tax cuts. The legislation also included the renewal of emergency jobless benefits for the long-term unemployed and a 2 percentage-point reduction in payroll taxes.