Economy in US shows a strong rebound

Gross domestic product expanded at a 4.0 per cent annual rate as activity picked up broadly after shrinking at a revised 2.1 per cent pace in the first quarter, the Commerce Department said.

That pushed GDP above the economy’s potential growth trend, which analysts put somewhere between a 2 per cent and 2.5 per cent pace. Economists had forecast the economy growing at a 3.0 per cent rate in the second quarter after a previously reported 2.9 per cent contraction.

The economy grew 0.9 per cent in the first half of this year and growth for 2014 as a whole could average above 2 per cent. The first quarter contraction, which was mostly weather-related, was the largest in five years.

Employment growth, which has exceeded 200,000 jobs in each of the last five months, and strong readings on the factory and services sectors from the Institute for Supply Management underpin the bullish expectations.

The government also published revisions to prior GDP data going back to 1999, which showed the economy performing much stronger in the second half of 2013 and for that year as a whole than previously reported.