The US economy grew at 1.9 per cent in the second quarter of 2008, the government said Thursday, shaking off an ongoing credit and housing crisis that had some predicting a recession in the first half of the year.

The gross domestic product (GDP) figure was up from a revised 0.9 per cent in the first quarter, but less than the 2.3 per cent economists had predicted for the world's largest economy, according to Bloomberg financial news.

In a surprising announcement, the Bureau of Economic Analysis (BEA) also revised fourth-quarter GDP figures down to a 0.2-per-cent contraction from an earlier estimated growth rate of 0.6 per cent.

That revision could spark new talk of a recession over the 2007- 2008 period. First-quarter 2008 growth was revised down slightly to 0.9 per cent from 1 per cent. A recession is typically defined as two straight contracting quarters.

The stronger second-quarter growth was largely due to a series of tax rebates issued to US consumers beginning in May as part of a 170- billion-dollar economic stimulus package passed by Congress. Consumer spending was up 1.5 per cent over the period.

The BEA in its advance estimate also attributed the improvement to strong exports, decreasing imports and higher government spending.
Residential fixed investment, or housing, continued to weigh heavily on growth, plunging 15.6 per cent on the quarter as the credit crisis continues to threaten many Americans with foreclosure.

President George W Bush on Wednesday signed a massive housing rescue package that would allow about 400,000 struggling homeowners to refinance into low-interest government loans and provides tax incentives to first-time home buyers.