Exports, tax rebates spur U.S. economy in Q2

The U.S. economy performed better than expected in the spring as it grew at a 3.3 per cent annual rate.

Economists had been looking for annualized growth in the quarter of 2.7 per cent. The figure also topped the U.S. government's initial estimate of a 1.9 per cent pace.

The U.S. Commerce Department said Thursday that gross domestic product was driven by sales of U.S. exports and by government tax rebates that gave a boost to consumer spending.

The April-June growth rate was the fastest since the third quarter of 2007.

The spring expansion followed a contraction in the last quarter of 2007 and a weak growth rate of only 0.9 per cent in the first three months of 2008.

"Looking ahead, there are already some signs that the impact of the tax rebates is starting to wane going into the third quarter and expectations that it will be totally spent by the fourth quarter," said Royal Bank assistant chief economist Paul Ferley.

"The support to exports from the earlier depreciation of the U.S. dollar may be more long-lived, although the greenback is starting to trend higher," he said.

Ferley added that the second quarter will likely mark the peak for U.S. economic activity this year, as the second half of 2008 is expected to be weaker.

Canadian GDP figures for the second quarter are due to be released Friday.

GDP revised upward in second quarter

GDP gains little ground

Canadian economy grows at weak rate of 0.3% in Q2

Trade surplus increased to $5.5B in May

U.S. economy grew 1% in Q1