US economy moves at moderate pace

US Federal Reserve boss Janet Yellen. Photo / AP

The United States economy is settling into a trot rather than a gallop, extending the slow progress that's defined the current expansion after a first-quarter scare.

Gross domestic product rose at a 2.3 per cent annualised rate from April through June after a revised 0.6 per cent advance the previous three months that wiped out a previously reported drop, Commerce Department data showed yesterday.

Consumer spending led the way and is poised to sustain growth in the second half of 2015 as an improving job market, rising home and stock prices and low fuel costs propel demand.

The figures underscore Federal Reserve boss Janet Yellen's view that increases in interest rates will be gradual to ensure the world's largest economy keeps making headway.

"It's not a sharp rebound, but it is a rebound, so that's good," said Nariman Behravesh, chief economist for IHS, the top GDP forecaster in the past two years, according to data compiled by Bloomberg.

"The stage is set for better performance in the second half. Consumer spending will be the mainstay."

The median forecast of 80 economists surveyed by Bloomberg projected that GDP would show a 2.5 per cent gain for the second quarter. The reading for the previous three months was revised from a previously reported 0.2 per cent drop.

The Commerce Department also issued its annual revisions, updating the data back through 2012.

The economic expansion over the past three years was weaker than initially projected, with the biggest revision coming in 2013. From the end of 2011 to the end of 2014, the economy expanded at a 2.1 per cent annualised rate, compared to the 2.4 per cent pace reported before.

"The US consumer continues to chug along," said Thomas Costerg, a senior economist at Standard Chartered Bank in New York.

"The second half should be better as some of the headwinds for the economy will dissipate."

- Bloomberg