The pulse of the United States economy is still beating, but more faintly than previously reported. The growth rate for the spring quarter was revised downwards by the US Commerce Department yesterday from 0.7 per cent to 0.2 per cent.

A couple of points lower could have signalled the beginning of a recession, measured by two successive quarters of negative growth. However analysts had forecast a sharper slowdown - to 0.1 per cent - and the dollar strengthened briefly on the evidence that there is still life in the world's largest economy.

The new figure for second-quarter gross domestic product, which measures the total output of goods and services, nevertheless marked the weakest quarter for the US economy since the first three months of 1993, when the US was emerging from its last recession.

It was the weakest quarter since the slowdown began a year ago. Shares plunged for the second day in succession, dipping over 100 points after the announcement, with investors still worried about the fall in consumer confidence recorded on Tuesday, weak profit forecasts, more lay-offs and growing apprehension about a global recession.

On a more positive note, in the GDP report the Commerce Department said businesses managed to make a better job of selling off bloated inventories, one of the major factors in the slowdown.

This rate of inventory-cutting, the most determined since the first quarter of 1983, gave some analysts cause for guarded optimism that a recession could be avoided. "We're not in a recession. We're not going to be in a recession. Recovery is on the horizon," said economist Paul Kasriel of Northern Trust in Chicago. "Future new orders are going to be filled more from current production and less from past production or taking inventories off the shelf because in some industries the shelves are pretty bare."

On the other hand companies reduced their spending on new production equipment in the April-June period more sharply than estimated a month ago - at a 14.6 per cent annual rate rather than 13.6 per cent - which helped account for the slower heart-beat of the economy.

The Bush administration is counting on lower interest rates and nearly $40 billion of tax rebates to lift the economy to higher growth rates in the second half of this year.