US consumer spending rose at its fastest pace in five months in July, a further sign the economy is not falling back into recession.

Consumer spending increased 0.8 per cent on strong demand for motor vehicles as Japan-related supply restraints faded, a commerce department report showed yesterday.

Spending had slipped 0.1 per cent in June.

The size of the bounceback, which accounts for about 70 per cent of US economic activity, beat forecasts for a 0.5 per cent advance. When adjusted for inflation, spending was up 0.5 per cent last month, the largest gain in 18 months and the first increase since April.