August 31, 2004 -- In a hopeful sign that the economy's poor performance in the second quarter was just a bump in the road, consumer spending rebounded in July, rising 0.8 percent.

The increase reported by the Commerce Department on Monday was a big improvement over June, when consumers spending dropped 0.2 percent. It was also slightly better than the 0.7 percent increase forecast by economists.

In the same report, data showed that personal income before taxes rose only 0.1 percent, after increasing 0.2 percent in June. Economists had expected incomes to improve 0.4 percent, according to a Dow Jones Newswire poll. Wages and salaries rose 0.4 percent in July, after being flat in June. The increase was offset by reduced government benefits, due to the expiration of a provision of the 2003 tax act that had boosted Medicare reimbursements, according to the report.

The spending report for July is good news after a rather lackluster second quarter, when the economy grew at a 2.8 percent annual pace, well below the first quarter's 4.5 percent rate. Spending on durable goods, or those expected to last three years or longer, jumped 4.1 percent, compared to a 3.2 percent drop in June. Motor vehicle spending in particular picked up.

Year-over-year, personal disposable income has increased 1.8 percent and consumer spending has risen 3.5 percent.

While data has generally been on the upswing this year, the major blemish has been that the economy has failed to consistently add jobs. July showed a slight gain of 32,000 jobs. The next employment situation report comes out this Friday. Economists forecast an increase of around 150,000 jobs.