Consumer spending rose in July at the strongest pace in four months, supported by a slight gain in incomes that offered hope consumers will be able to keep contributing to a modest economic recovery.
Analysts said the 0.4% increase in spending reported by the Commerce Department this week was a relief after reports of other weak data for July. The new report also helped ease fears the economy was sliding back into recession.
The increase in spending was a touch above expectations in financial markets for a 0.3% rise. Spending, which was flat in June, was supported by a 0.2% gain in incomes and households' dipping into their savings.
Overall, recent economic data has suggested the economy's recovery from the longest and deepest recession since the 1930s likely is slowing. The government last week lowered its estimate of second-quarter growth to a 1.6% annual rate from 2.4%, although the figure on consumer spending was revised higher.
The deluge of weak data led Federal Reserve Chairman Ben Bernanke last week to stress the U.S. central bank's commitment to spur the recovery should the outlook deteriorate.