Official figures show that US consumer spending grew by 0.4% in July. The Commerce Department report also showed personal incomes rose 0.5%.
The figures were ahead of Wall Street expectations for a 0.3% increase in each index.
The personal consumption expenditure index, a measure of inflation, was up 0.1%, the same as the core index which excludes food and energy prices.
The report was among the first piece of economic news for the third quarter, which is expected to show a slowdown after a 4% growth rate in the April-June quarter.
Analysts said the report may be encouraging to the Federal Reserve because it shows core inflation within the central bank's unofficial 'comfort zone' of 1-2%, making a rate cut more likely.
