US economy grows at 1.7 pct. pace in 2nd quarter

WASHINGTON (AP) — The U.S. economy grew from April through June at a modest seasonally adjusted annual rate of 1.7 percent, as businesses spent more and the federal government cut less.

The Commerce Department said today that growth improved from a 1.1 percent rate in the January-March quarter, which was revised from an initial 1.8 percent rate.

While growth remains sluggish, the pickup was surprising as most economists predicted a far weaker second quarter. And it suggests the economy could accelerate later this year as businesses step up spending and the drag from steep government cuts fade.

The second-quarter figure indicates "the recovery is gaining momentum," Paul Ashworth, an economist at Capital Economics, said in a note to clients.

Businesses increased their spending 4.6 percent in the second quarter after cutting by the same amount in the previous quarter. And spending on home construction grew 13.4 percent, in line with the previous quarter.