A key measure of underlying US inflation posted the smallest back-to-back monthly gains in over two years, encouraging a burst of consumer spending and feeding growing expectations that the economy can avert recession.

The core personal consumption expenditures price index, which strips out the volatile food and energy components, rose 0.2% in July for a second month. The overall PCE price index also increased 0.2%, Bureau of Economic Analysis data showed Thursday.

Inflation-adjusted consumer spending increased 0.6% last month on the heels of a solid gain in June. That was the strongest advance since the start of the year.

Forecasters expected the core PCE price index to rise 0.2% on a month-to-month basis, while real consumer spending was anticipated to advance 0.5%.

Source : Bloomberg