Washington: Consumer spending in the US rose 0.8 percent in July, the biggest increase in two years, the Commerce Department said on Monday.

July's gain helps offset the bad news in June, when spending dropped 0.1 percent, the first decline since 2009.

Consumer spending has a strong impact on the US economy since it represents almost 70 percent of gross domestic product, which grew only 1 percent in the second quarter.

Between April and June, consumer spending was up a mere 0.4 percent, the worst quarterly figure for more than a year and well below the 2.1 percent recorded in the first three months of 2011.

Meanwhile, workers' income grew by 0.3 percent in July, compared with a 0.2 percent increase in June.

At the same time the individual savings rate declined to 5 percent in July from 5.5 percent in June, when it reached its highest point to date in 2011.

The price index for consumer goods, one of the three inflation indicators in the US and one that is closely watched by the Federal Reserve, grew 0.2 percent in July.

The US economy created only 117,000 net new jobs in July, bringing the official unemployment rate down by a tenth of a percentage point to 9.1 percent.

Nearly 14 million people remain out of work more than two years after a recession that destroyed 8.4 million jobs, while the workforce participation rate - the proportion of the population working or seeking work - declined last month to 63.9 percent, the lowest since 1984.

(Agencies)