WASHINGTON -- Consumers' spending slowed in July, rising by the smallest amount in nine months, even as tax-rebate checks helped push up their incomes.
The Commerce Department reported Thursday that consumer spending, which accounts for two-thirds of all economic activity, increased by an expected 0.1 percent. That was the smallest gain since October and represented a pullback from June's 0.5 percent increase.
Americans' incomes, which include wages, interest and government benefits, however, rose by 0.5 percent in July, the largest increase since December. In June, incomes rose by 0.4 percent.
Economists had predicted that consumers, a key force keeping the economy afloat, would tighten their belts in July even as the tax-rebate checks began to flow. The main reason for more cautious spending, economists say, is that people are worried about holding onto their jobs in the face of mounting layoffs and the sour economy.
The spending and income figures aren't adjusted for inflation.
In an effort to avert a recession, the Federal Reserve has slashed interest rates seven times this year and some analysts say another rate cut is likely in October.
In July, spending on durables -- costly manufactured goods expected to last at least three years, such as cars and washing machines -- fell by 1.1 percent, following a 2.3 percent increase the month before.
Spending on nondurables, such as clothes and foods, edged down by 0.1 percent in July for the second month in a row.
Spending on services rose by 0.4 percent.
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