U.S. consumers slashed their spending in June by the largest amount in three years.

The Commerce Department reported Tuesday that consumer spending dropped by a sharp 0.7% in June from the previous month. The retrenchment came after consumers splurged in May, ratcheting up spending by a strong 1%.

Separately, Americans’ incomes rose by 0.2% in June, down from a solid 0.6% increase the month before.

The latest numbers on consumer spending were weaker than economists expected. They were forecasting a tiny 0.1% dip in spending and a 0.3% rise in incomes for June.

Consumer spending accounts for roughly two-thirds of all economic activity in the United States.

The 0.7% decline in spending was the first since September 2003 and the largest drop since September 2001.

On Friday, the Commerce Department noted that U.S. consumer spending grew at an annual rate of only 1% in the second quarter, the slowest growth in three years.

U.S. gross domestic product grew at an annual rate of 3% for the second quarter. That was down from the 4.5% seen in the first three months of 2004.