US economy grew at a strong 4% rate in spring

After a dismal winter, the United States (US) economy sprang back to life in the April-June quarter, growing at a fast four per cent annual rate on the strength of higher consumer and business spending.

The rebound reported Wednesday by the Commerce Department followed a sharp 2.1 per cent annualised drop in economic activity in the January-March quarter. That figure was revised up from a previous estimate of a 2.9 per cent drop. But it was still the biggest contraction since early 2009 in the depths of the Great Recession.

Last quarter's bounce-back was broad-based, with consumers, businesses, the housing industry and state and local governments all combining to fuel growth. The robust expansion will reinforce analysts' view that the economy's momentum is extending into the second half of the year, when they forecast an annual growth rate of around 3 per cent.

Revised data

The government on Wednesday also updated its estimates of growth leading into this year. They show the economy expanded in the second half of 2013 at the fastest pace in a decade and more than previously estimated. The revised data also show that the economy grew faster in 2013 than previously estimated, though more slowly in 2011 and 2012 than earlier thought.

The second quarter's four per cent growth in the gross domestic product - the economy's total output of goods and services - was the best showing since a 4.5 per cent increase in July-September quarter of 2013.

At the same time, a higher trade deficit slowed growth as imports outpaced a solid increase in exports.

Paul Ashworth, chief US economist at Capital Economics, said that given the solid rebound last quarter, he's boosting his estimate for growth this year to a two per cent annual rate, up from a previous 1.7 per cent forecast. Ashworth said the rebound also supported his view that the Federal Reserve, which is ending a two-day meeting Wednesday, will be inclined to start raising interest rates early next year.

Most economists have been predicting that the Fed would wait until mid-2015 to start raising rates.

"At the margin, this GDP report supports our view that an improving economy will persuade the Fed to begin raising rates in March next year," Ashcroft wrote in a research note.

- AP