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US economy enjoys broad-based rebound in second quarter

US economy enjoys broad-based rebound in second quarter
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The US economy has posted a much bigger than expected jump in growth in the second quarter.

Gross domestic product rose by 4.0 percent according to the Commerce Department’s first estimate.

In addition the decline in output during the first three months of this year was not as bad as previously reported.

The government revised first-quarter GDP to show output contracting at a 2.1 percent pace instead of 2.9 percent.

Growth in the second quarter of 2014 was driven mainly by more Americans going shopping and a swing in business inventories.

Consumer spending, which accounts for more than two-thirds of US economic activity, accelerated at a 2.5 percent pace as a strong spring rebound followed the winter weather related hit in the first quarter .

Despite the pick-up in spending, Americans saved more in the second quarter. The saving rate increased to 5.3 percent from 4.9 percent in the first quarter as incomes rose, which bodes well for future spending.

Wall Street welcomed the upbeat reading, which bolsters views for a stronger performance in the last six months of the year.

Stronger 2013

It also turns out economic growth in the US was far stronger than previously estimated in the second half of 2013, which could help to explain a sharp drop in the unemployment rate during the period.

Gross domestic product increased at a 4.0 percent pace in the July-December period. That compared to a previous estimate of 3.4 percent.

The unemployment rate dropped 0.6 percentage point to 6.7 percent of the workforce in the second half of last year. The stronger growth profile suggests the decline in the jobless rate was largely driven by improving job market conditions rather than frustrated people giving up looking for work.

The government raised its calculation of 2013 third-quarter growth to a 4.5 percent annual pace from the previous 4.1 percent.

Growth for the fourth quarter of last year was lifted to a 3.5 percent annual rate from a previously reported 2.6 percent.

Growth for all of 2013 is now thought to have been 2.2 percent rather than 1.9 percent.

The revisions reflected stronger consumer spending, business investment and exports than previously reported, and point to underlying momentum in the economy before it was slammed by an unseasonably cold winter in the first quarter of 2014.

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