Growth boost for US economy

Can consumer confidence hold up?

The US economy grew by a faster-than-expected 3.3% annual rate in the April to June period, according to the latest set of official figures.

The upward revision took many analysts by surprise as they had expected the figure to remain unchanged from the previous estimate of 3.1%.

Higher spending on home construction and healthy consumer expenditure helped push the growth figure higher.

However, a surprise fall in a measure of consumer confidence also released on Friday indicated that a smooth recovery may not be guaranteed.

Gaining momentum

The upward revision to US gross domestic product (GDP) has raised hopes that the economy is set for a period of rapid growth.

Economists are now expecting the economy to reach annual growth rates of 4% or more in the second half of the year.

Growth is expected to remain strong

Among the factors driving growth was spending on home construction which grew at an annual rate of 6.6%.

Consumer spending growth stayed unchanged at 3.8%, but spending on durable goods was revised upwards to 24.3%.

Spending on national defence, which soared to levels unseen since the Korean War during the war in Iraq, was only slightly changed from last month's estimate of 45.9% to 45.8%.

"(The figures are) very positive and it suggests there's good forward momentum in the economy," said economist John Silvia of Wachovia Securities.

Analysts are expecting the economy to receive a further push in coming months from low interest rates and the tax cuts that President Bush pushed through Congress earlier this year.

Job fears

There was, however, some bad news among the latest GDP data, with company profits after tax falling 5% in the quarter, compared with a 3.8% increase in the January to March period.

Some more bad news followed as the latest consumer sentiment figure from the University of Michigan fell.

The September index dropped to 87.7, down from 89.3 in August and worse than analysts' expectations.

Confidence was knocked by the poor state of the job market. US unemployment has remained stubbornly high despite signs of recovery in many parts of the economy.