The US economy expanded at a stronger rate in the second quarter than previously estimated, according to figures released on Thursday.
After a boost to figures for exports and business investments, the Commerce Department revised its measure of the nation's gross domestic product (GDP), the broadest measure of goods and services produced in the economy, to an annual rate of 2.5% in the second quarter, up from an initial estimate of 1.7% reported last month.
The rate of growth was more than double the pace clocked in the prior three months and stronger than the 2.2% that economists polled by Reuters had forecast.
US stock markets reacted positively to the news, which was released as the Labor Department reported another slide in the number of people claiming unemployment benefits for the first time. Initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 331,000 for the week ending 24 August, the Labor Department said.
The report comes as the Federal Reserve appears close to cutting back on its $85bn a month bond-buying stimulus programme, known as quantitative easing. Federal Reserve chairman Ben Bernanke has indicated that the programme could be scaled back as early as later this year but has as yet not specified a date.
Bernanke has tied a cut in QE to the unemployment rate. Next Friday the US releases its monthly tally of employment figures, the non-farm payroll report. The continued fall in initial claims helped push the unemployment rate to 7.4% last month, its lowest level since late 2008.
However, economists warned that problems remained in the US economy and the revision in GDP also highlighted some of those weaknesses. Consumer spending remained unchanged in the quarter and state and local government spending fell in the quarter as compared to being up in the initial estimate.
Gus Faucher, senior economist at PNC Financial Services, said the rise was good news. "But it's still a 1.6% rise year over year, and that's soft. We are still down 2m jobs and we are seeing significant drag from tax increases and spending cuts."
Faucher said growth should pick up in the second half of 2013 and into 2014. "Consumers are adjusting to higher taxes. Business investment will continue to improve as profits are at a record high and borrowing costs are still very low, despite the recent increase in rates," he said.
Dan Greenhaus, chief global strategist with broker BTIG said: "With the revisions, our original estimate calling for 1.5% growth in the first half was a bit under what has actually occurred. That's a positive but of course what matters now is not what has happened but what will happen. In that regard, the consensus still expects roughly 2.5% growth in the second half but that may prove to be too optimistic."
The GDP figures come amid a looming clash in Washington over the "debt ceiling" – the limit set by Congress on the US's ability to borrow. Treasury secretary Jack Lew warned earlier this week that if Congress fails to act soon, the US would hit its debt limit by mid-October.
Failure to reach a new agreement would risk "irreparable harm" to the US economy and leave the government struggling to make the 80m payments a month it sends out, including military salaries and social security cheques, he said.
Faucher said failure to raise the debt ceiling would be "disastrous – worse than a government shutdown." But he said ultimately he expected Congress would act to see off the crisis.
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