Recovery in the US gathering momentum

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The US economy rebounded more strongly than initially thought in the second quarter with more of the growth being driven by domestic demand and less by restocking by businesses.

Gross domestic product expanded at a 4.2 per cent annual rate instead of the previously reported 4.0 per cent pace, the Commerce Department said yesterday, reflecting upward revisions to business spending and exports.

It was the fastest pace since the third quarter of 2013.

A separate report from the Labor Department showed the number of Americans filing new applications for jobless benefits slipped 1,000 to a seasonally adjusted 298,000 last week. It was the second week of consecutive declines in initial claims and underscored the strengthening labour market fundamentals.

The dollar extended gains against a basket of currencies on the data, while prices for US Treasury debt fell slightly.

The composition of growth in the second quarter was even more encouraging, with the sources of growth broad-based.

Domestic demand increased at a brisk 3.1 percent rate, instead of the previously reported 2.8 per cent pace.

It was the fastest pace since the second quarter of 2010 and suggested the recovery was becoming more durable after output slumped in the first quarter because of an unusually cold winter.