Strong exports and consumer spending supported by government stimulus checks pushed the US economy ahead at a solid 3.3 per cent annual rate in the second quarter, much stronger than first thought, but growth is expected to flag as those factors fade.

The US Commerce Department on Thursday said consumer spending and net exports were more robust than initially estimated and that inventories fell less sharply. A month ago, it had said US gross domestic product had expanded at a 1.9 per cent rate in the quarter.

The revised GDP figure was much stronger than the 2.7 per cent gain Wall Street analysts had expected.

The report added to evidence the US economy may skirt the downturn many had forecast as a result of a deep decline in housing markets, tight credit and high energy and food prices.

US stocks were up more than one per cent at midday on the economy’s unexpected vigor and the dollar pared losses against the euro, while Treasury debt prices fell.

“It’s clear that the second quarter not only wasn't a recession quarter, it was actually a very robust quarter," said Michael Englund, chief economist for Action Economics in Boulder, Colorado. GDP had grown at a sluggish 0.9 per cent rate in the first quarter after a 0.2 per cent contraction in the final three months of 2007. The fourth quarter of last year was the weakest since July-September 2001, when the economy was in recession.

The Federal Reserve has held benchmark interest rates at 2 per cent since April to bolster the struggling economy. Growth in the second quarter at close to the level of long-term trends could make it easier for the Fed to raise interest rates to combat troublesome inflation.

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