NEW YORK, Aug 11: The US economy is in good shape, with growth moderating to a more sustainable pace from the rapid expansion in the early part of the year, US Treasury Secretary Henry Paulson said on Friday.

"We have a healthy economy in the US," Mr Paulson said in an interview with CNBC television from the Chicago Board of Trade. "We appear to be making a transition from a level of growth that was seen over the last couple of years and the first quarter, that was fairly not sustainable, to a more sustainable level of growth."

The US economy grew at an annual rate of 2.5 per cent in the second quarter, sharply slowing from the 5.6 per cent rate in the first three months of the year.

This slowing pace of growth and other economic indicators such as slowing job creation helped prompt the Federal Reserve earlier this week to halt its more than two-year campaign of raising interest rates.

After 17 consecutive rate hikes, the Fed left key interest rates on hold at 5.25 per cent on Tuesday.

Data on Friday showed that retail sales in July rose at a faster-than-expected pace of 1.4 per cent in July, suggesting to some that the Fed may have to rethink its pause on rates.

Mr Paulson, only a month into the job after leaving the top post at Goldman Sachs, said he had complete faith in Fed Chairman Ben Bernanke, himself a relative rookie having replaced Alan Greenspan earlier this year.

"Chairman Ben Bernanke is really an outstanding professional. I've got a very, very high regard for him and the job he's doing. I've got great confidence in his ability to do that job in a first class manner," Paulson said.

On China, Mr Paulson repeated his call on Beijing to allow the renminbi, or yuan, to trade more freely. "There's no doubt that in the short term, they need to show much more flexibility on the renminbi. In longer term, we all want the renminbi to be able to be traded in an open, competitive market place," Mr Paulson said.

China must also try to reduce its high savings rate and ensure its economy, growing at more than 10 per cent a year according to the latest figures, doesn't overheat.

"China needs to make the transition from an export-driven economy to one that consumes more," the treasury secretary said.

Many American lawmakers and business leaders argue that China's tightly controlled exchange rate and ballooning trade surplus are fuelling so-called global imbalances and undercutting US exporters.

—Reuters