The Commerce Department said Tuesday that consumer spending was flat in June after declining 0.1 percent in May.
Income rose 0.5 percent. And wages, the largest component of income, also increased 0.5 percent, the biggest gain since March.
The jump in income went straight to savings. The savings rate rose to 4.4 percent in June, the highest level in a year.
Consumers cut back on spending this spring, reflecting rising uncertainty about the economy and jobs. In June, they spent slightly more on services. But they cut back on autos and other long-lasting manufactured goods. They also spent less on non-durable goods, such as clothing, food and gasoline — although some of that may reflect lower gas prices.
Weak consumer spending was the main reason the economy grew at an annual pace of just 1.5 percent in the April-June quarter. That's slower than the 2 percent growth rate in the January-March quarter this year. Consumer spending drives roughly 70 percent of growth.
Economists don't expect growth to accelerate much in the second half of the year. Europe's financial woes and a U.S. budget crisis are likely to weigh on business and consumer confidence. And job growth is expected to stay weak.
Annual growth of 2 percent generally adds only about 90,000 jobs a month, according to economists. That's not enough to drive down the unemployment rate, which is stuck at 8.2 percent. Healthier growth of 4 percent or more is needed to reduce unemployment significantly.
The government will release the July jobs report on Friday. Economists forecast that employers added 100,000 jobs. That would be only slightly better than the 75,000 a month from April through June and still down from a healthy 226,000 average in the first three months of the year.
Without more jobs, income growth is likely to remain sub-par and consumers are likely to remain cautious about spending.
Sluggish economic growth could compel the Federal Reserve to announce further efforts to bolster the economy. Fed officials meet Tuesday and Wednesday.
Still, many private economists believe the Fed will wait until their Sept. 12-13 meeting. That would allow the Fed more time to review the July and August jobs reports before taking new steps.
Economists had hoped that falling gas prices would give consumers more money to spend elsewhere and boost growth in the second half of the year.
But gas prices have stopped falling and have even started to rise in recent weeks. And this summer's severe drought is expected to push food prices up toward the end of the year.