Consumer spending grew in July by 0.8 percent, the largest amount in five months. That increase followed a decline in June and helped ease fears that the U.S. economy is on the verge of another recession.
Federal Reserve Chairman Ben Bernanke leaned on Congress on Friday to do more to promote hiring and growth, or risk delaying the economy's return to full health.
Service businesses such as restaurants, hotels and financial companies experienced their weakest growth in 17 months in July.
Americans cut back on their spending in June for the first time in nearly two years and their incomes grew by the smallest amount in nine months, a troubling sign for an economy that is barely growing.
A mixed slate of reports Thursday showed the economy is being held back by high gas prices and sluggish hiring.
The U.S. trade deficit surged in May to the highest level in more than 2 1/2 years, driven wider by a big increase in oil imports and a decline in exports.
U.S. companies sold fewer products overseas in February, but the trade deficit narrowed because of a big decline in oil imports.
Damage from the housing bust is spreading to areas once thought to be immune.
Americans earned a little more and spent a little more in February, thanks to a tax cut. But a big part of the extra money went to cover higher gas prices.