Official figures show that US consumer spending rose slightly more than expected in June, lifted by spending on non-durable goods, even though incomes recorded the biggest drop in four and a half years.
The Commerce Department said spending rose 0.4% after a revised 0.1% increase in May, previously reported as a 0.3% rise.
That compared with market expectations for a 0.3% increase in spending, which accounts for more than two-thirds of US economic activity. Adjusted for inflation, however, spending fell 0.1% after being flat in May.
Personal income declined 1.3% in June, the biggest decrease since January 2005, the Commerce Department said. This was worse than market expectations for a 1% drop and reflected a once-off government payment to social security recipients in May which was not repeated in June.
Real disposable income tumbled 1.8% in June, the largest decline since last June, the department said. The decline in income led to a decrease in savings during the month. Savings fell to an annual rate of $505 billion, with the saving rate slipping to 4.6% from 6.2% in May.
A measure of inflation closely watched by the Federal Reserve - the year-on-year personal consumption expenditures index excluding food and energy - rose 1.5% after a 1.6% increase in May.
More signs of US housing improvement
Separate figures showed that pending sales of previously owned US homes rose at a faster than expected pace in June. The figures are seen as more evidence that the US housing market is starting to claw its way out of a three-year slump.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in June, rose 3.6% to 94.6. It was the fifth straight month of advance, the first such run of gains in six years, the industry group said. May's index was revised upwards to 91.3 from 90.7.
'Historically low mortgage interest rates, affordable home prices and large selection are encouraging buyers who've been on the sidelines,' said NAR chief economist Lawrence Yun.
