The US expansion accelerated modestly in the second quarter as government stimulus payments helped consumers add more buying punch to the economy, a Commerce Department report this afternoon showed.
Gross Domestic Product or GDP grew at a 1.9 per cent annual rate, up from a revised 0.9 per cent rate in the first quarter that previously was reported as 1 per cent.
That followed a 0.2 per cent contraction in GDP during the final quarter of 2007 and avoided pushing the economy into back-to-back declines that would have met a popular definition of recession.
Economists surveyed by Reuters had expected a 2 per cent rise in GDP in the second quarter.
Separately, the Labor Department reported a sharp jump in the number of US workers filing new claims for jobless benefits - up 44,000 though officials said some special factors were involved.
Nonetheless, the prospect of rising unemployment was likely to fan new calls for additional stimulus to keep the jobless rolls from swelling in a slowly growing economy.
The Commerce Department said businesses reduced inventories at the sharpest rate since the end of 2001 in a sign they anticipate restrained growth ahead.
A key reading on core inflation - personal consumption expenditures excluding food and energy - rose at a 2.1 per cent annual rate in the second quarter after gaining 2.3 per cent in the first quarter.
The moderation in core prices came despite a jump in overall prices to 4.2 per cent from 3.6 per cent in the first quarter.
US stock futures fell and the dollar's value weakened against other key currencies after the data was issued. Prices for US Treasury debt securities rose.
"At first glance, the 1.9 per cent on GDP is OK," said Subodh Kumar, chief investment strategist for Subodh Kumar & Associates in Toronto. "I don't see the risk of the market collapsing because of recession fears."
Consumer spending that fuels two-thirds of US economic activity grew at a 1.5 per cent annual rate in the second quarter, up from 0.9 per cent in the first quarter and 1 percent in the fourth quarter last year.
The department noted that personal incomes had risen more sharply in the second quarter and attributed it primarily to the stimulus payments that the government was issuing to qualifying consumers.