US second-quarter GDP growth rate revised up to 3.8%

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The US economy grew more strongly in the second quarter than previously estimated, after figures on consumer spending were revised sharply higher.

GDP increased at an annualised rate of 3.8 per cent in the three months to the end of June, the Bureau of Economic Analysis said on Thursday in its third estimate of growth for the second quarter. That was up from 3.3 per cent in the second reading, though first-quarter growth was revised lower to a 0.6 per cent contraction.

Consumer spending was revised significantly higher, growing at an annualised rate of 2.5 per cent, compared with 1.6 per cent in the previous estimate. The BEA said the revision was driven by increases in purchases of transportation and financial services, as well as insurance. This was partially offset by a downward revision to exports.

The revised figures come a week after the Federal Reserve reduced borrowing costs for the first time this year, citing a significant slowdown in the labour market. Fed officials have signalled more rate cuts on the horizon, but have also said that they will review economic data to decide on their next policy moves.

Short-term US government debt, which is sensitive to expectations for monetary policy, fell in price on Thursday morning, sending yields higher. The two-year Treasury yield was up 0.07 percentage points to 3.67 per cent in recent trading.

This is a developing story