US economy bounces on tax rebates

WALL Street charged higher last night as a report showing the US economy had surged ahead in the second quarter buoyed investor confidence.

According to the US commerce department, gross domestic product rose at a revised annual rate of 3.3 per cent between April and June – well ahead of an initial estimate of 1.9 per cent made last month.

It marks the fastest pace in nearly a year as overseas buyers snapped up US exports and tax rebates spurred domestic shoppers.

Economists had been expecting the first estimate to be revised upwards to 2.7 per cent yesterday.

Despite the upbeat result, which contrasts with recent evidence that the UK economy had ground to a halt after 16 years of growth, a growing number of analysts fear that the US will hit another economic pothole in the fourth quarter, as the bracing impact of the tax rebates disappears.

Avery Shenfeld, senior economist at CIBC World Markets, said: "For a recession, the economy is certainly growing very quickly.

"A lot of that growth is driven off exports and pessimists might say that can't continue during slowing growth overseas."