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US growth bounces back on higher domestic spending

Following a dismal performance in the first quarter, the US economy made a strong comeback between April and June. Americans emerged from a harsh winter with a mood to spend and growth jumped to a staggering 4 percent.

The 4 percent jump in US gross domestic product (GDP) reported Wednesday by the Commerce Department was caused by higher spending by consumers and businesses as well as state and local governments.

In the second quarter, American consumers spent 2.5 percent more than in the same quarter last year, with purchases of durable goods such as automobiles surging by an amazing 14 percent - the biggest quarterly rise since 2009.

Business spending between April and June jumped at a rate of 7 percent.

Housing construction - up 7.5 percent - as well as government spending also recovered as the US economy climbed out of the doldrums that saw

economic contraction of 2.1 percent in the first quarter of 2014


According to the Commerce Department figures, the rebound was the strongest since the third quarter last year in which the US economy grew by an annualized 4.5 percent.

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The robust expansion is reinforcing expectations of an annual growth rate of 3 percent in the second half of the year.

It will, however, also support views expressed by some analysts that the US central bank, the Fed, is now more likely to start raising interest rates earlier than expected.

"At the margin, this GDP Report supports our view that an improving economy will persuade the Fed to begin raising interest rates in March next year," Paul Ashworth, Chief Economist at Capital Economics, told AP news agency.

Most economists believe that the Fed will wait until mid-2015 to start raising rates.

After the 2008 financial crisis, the Fed has cut its base rate to a historic low of 0.25 percent and has launched a massive bond-buying program to shore up the US economy.

The central bank has tied an end of its ultra-loose monetary policy to

a significant upswing in the US jobs market

and robust economic growth.

uhe/chc (AP, AFP, dpa)

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