US spending rose 0.2% in July, as the effects of a government stimulus package designed to boost slowing economic growth wore off.
Consumer spending - which accounts for two thirds of the US economy - had gained 0.6% in June.
Personal income fell 0.7% in July, the sharpest fall since a 2.3% drop in August 2005 after Hurricane Katrina.
Friday's data provides further evidence of a slowing economy, despite earlier reports of strong US growth.
The US economy grew at a revised 3.3% annual rate in the second quarter of 2008, the Commerce Department said, much higher than its first estimate of 1.9%.
The rebound was linked to strong US exports, helped by the weak dollar, while government tax rebates also boosted consumer spending.
(BBC)
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