WASHINGTON, Sept 27: Healthy consumer spending nudged US economic growth ahead at a slightly faster second-quarter pace than previously thought, the Commerce Department said on Friday, outpacing analysts’ expectations and setting the stage for a second-half surge in growth.

Gross domestic product, or GDP, grew at a revised 3.3 per cent annual rate in the three months from April to June, up from a 3.1 per cent rate reported a month ago. Wall Street economists had expected the figure to stay unrevised.

Separately, a key survey of consumers said confidence slipped in September, possibly reflecting the strain from the continued lack of new jobs since the 2001 recession ended.

Analysts said it requires time for businesses to take up the economic slack and to begin hiring aggressively, something the Bush administration wants to happen well in advance of the November presidential elections next year.

Stronger GDP growth is a start, since it draws down stocks of unsold goods and makes room to ramp up production.

The second-quarter pace of expansion was more than double the 1.4 per cent in each of the two preceding quarters and was the strongest since 4 per cent in the third quarter last year.

GDP growth is widely predicted to accelerate to 4 per cent or higher in the third and fourth quarters, supported by a buoyant housing market and lean inventories, which imply businesses have more incentive to make new investments.

It seems likely that inventory-building will help to support growth into next year, even if growth in demand moderates somewhat ... as seems likely in the wake of the consumer’s summer binge, economist Jade Zelnik of Greenwich Capital Markets said, adding GDP may have boomed ahead at a 5 to 6 per cent annual clip in the third quarter.

With the Federal Reserve having cut US interest rates to 45-year lows and following the Bush administration’s latest tax cuts, analysts said there should be a visible pickup in job creation by sometime next year, ahead of November elections.

A tremendous amount of ‘juice’ has been pumped into the system in terms of increased liquidity and it would be awfully hard to believe you wouldn’t get significant employment effects well before the political deadline, said Robert Dederick, economic consultant to Northern Trust Co. in Chicago.

Exceptionally robust defense spending — up 45.8 per cent in the second quarter for the strongest quarterly growth since 1951 in the Korean War era — added impetus to growth in the spring and may last for some time as US involvement in Iraq and elsewhere continues.

Consumer spending increased at a 3.8 per cent annual rate in the second quarter, nearly double the first quarter’s 2 per cent — significant since spending on goods and services fuels two-thirds of national economic activity.

With jobs not simply scarce but still disappearing, however, there are concerns that consumers’ ability to add their spending punch to the economy may have limits.

New data on Friday on consumer confidence, prepared by the University of Michigan and given only to paying customers, showed its consumer sentiment index unexpectedly fell to 87.7 in September from 89.3 in August, according to market sources.

It remained well above a nine-year low of 77.6 touched in March at the start of the Iraqi war but the softening from August came as a surprise in light of other buoyant data on housing and other economic sectors.

Steady layoffs foster worry for the sustainability of the recovery. Boston Federal Reserve Bank President Cathy Minehan noted on Thursday that more than a million jobs have been lost just in the period since November, 2001, when the last recession ended, making this the most jobless recovery on record.

Financial markets were uncertain what to make of the data. The Dow Jones industrial average and the Nasdaq composite index were down fractionally in mid-afternoon as investors mulled whether growth might falter if consumer sentiment weakened.

The report contained one sour note, as Commerce reported corporate profits after taxes shrank 5 per cent in the second quarter, deeper than the 3.4 per cent drop reported a month ago and a contrast with the first quarter’s rise of 3.8 per cent.—Reuters