The U.S. economy grew at its strongest pace in more than a year during the spring with improved international trade and business investment helping to make up for weakness in the housing market.A U.S. Commerce Department report released Thursday showed the gross domestic product expanded at an annual rate of 4 percent in the April-June quarter, significantly higher than the 3.4 percent rate the government had initially estimated a month ago. But economists remain concerned that recent turmoil in the financial markets could seriously impact economic activity in the second half of this year. Analysts think GDP growth may have slowed to just above 2 percent in the current quarter.Investors are hoping that the Federal Reserve will act cut the federal funds rate, a key interest rate that banks charge each other, at its next meeting on September 18. That rate has been at 5.25 percent for more than a year.The Fed has taken other measures to stabilize the market, including cutting its discount rate and injecting billions of dollars into the banking system in an effort to keep credit markets operating The 4 percent GDP growth rate for the second quarter marked a sharp jump from the mere 0.6 percent pace registered for the first three months of the year. It was the fastest GDP increase since a 4.8 percent growth rate in the first three months of 2006.The revision from the initial estimate of 3.4 percent second quarter growth reflected an improving trade deficit, with stronger export sales and fewer imports.Business investment, in the form of rebuilding of inventories, and construction of shopping centers, office buildings and other non-residential projects was also stronger than previously believed.However, consumer spending, which accounts for two-thirds of total economic activity, did show a marked slowdown in the second quarter, growing at an annual rate of 1.4 percent, less than half the first quarter increase.Housing construction, which had been a standout performer during five boom years, suffered another drop, falling at an annual rate of 11.6 percent, the sixth straight decline in this industry.All of the changes left GDP, after adjusting for inflation, growing at an annual rate of $11.5 trillion in the second quarter.
