Consumer spending barely grew in August after a sharp rise the previous month as incomes rose by the smallest amount since winter, the Commerce Department said Friday.
Analysts had expected Americans to slow their pace of spending following strong 0.4 percent growth in July.
But the growth of less than 0.1 percent meaning spending was essentially flat was well below economists forecasts of 0.2 percent.
Taking inflation into account, consumer spending actually declined slightly in August, the first time thats happened since January.
Consumers cooled their spending because the growth of their incomes slowed.
Personal income increased 0.2 percent in August, half of the strong 0.4 percent pace of the previous month.
Consumers also saved more in August. The share of disposable income saved increased by 0.1 percentage point to 5.7 percent.
The drop in inflation-adjusted spending came in part because inflation increased in August.
The price index for personal consumption expenditures the Federal Reserves preferred inflation measure increased 0.1 percent in August after being flat the previous month.
For the 12 months ended Aug. 30, prices increased 1 percent, a stronger annual inflation rate than recorded in July.
Excluding volatile food and energy costs, prices increased 1.7 percent for the 12 months ended Aug. 30.
The Fed wants to see 2 percent annual inflation.