The Commerce Department said consumer spending rose 0.4% last month. Data for May was revised up to show consumer spending advancing 0.5% instead of the previously reported 0.2% gain.

Last month's increase in consumer spending was in line with market expectations. The data was included in last Friday's second-quarter gross domestic product report, which showed consumer spending accelerating at a 4.0% annualized rate during that period after a pedestrian 0.5% pace in the first quarter.

The economy grew at a 4.1% rate in the second quarter, almost double the January-March period's 2.2% pace and the strongest performance in nearly four years. June's increase in consumer spending sets it on a higher growth path heading into the third quarter.

Consumer spending last month was boosted by spending at restaurants and on accommodation. Spending on services accelerated 0.6% after rising 0.3% in May. Outlays on goods were unchanged after surging 0.9% in May.

Prices continued to steadily rise last month. The PCE price index excluding the volatile food and energy components gained 0.1% in June. It had risen by 0.2% in the prior month.

That kept the year-on-year increase in the so-called core PCE price index at 1.9% for a third straight month.

The core PCE index is the Fed's preferred inflation measure. The core PCE hit the U.S. central bank's 2% inflation target in March for the first time since December 2011.

In a separate report on Tuesday, the Labor Department said its Employment Cost Index, the broadest measure of labor costs, rose 0.6% after an unrevised 0.8% advance in the first quarter. That pushed the annual increase in the ECI to 2.8%, the biggest gain since the third quarter of 2008, from 2.7% in the first quarter.

Wages and salaries, which account for 70% of employment costs, rose 0.5% in the second quarter, retreating from a 0.9% surge in the January-March period. Wages and salaries were up 2.8% in the 12 months through June, also the biggest annual gain since the third quarter of 2008.

The Fed is expected leave interest rates unchanged on Wednesday after increasing borrowing costs in June for the second time this year. It has forecast two more rate hikes by December.

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