US economy contracts in second quarter; underlying data show no recession

Second-quarter GDP contraction revised to 0.6% from 0.9%; gross domestic income rises at 1.4% rate in Q2; average of GDP and GDI climbs at 0.4% pace; weekly jobless claims drop 2,000 to 243,000

The U.S. economy contracted at a more moderate pace than initially thought in the second quarter as consumer spending blunted some of the drag from a slower pace of inventory accumulation, dispelling fears that a recession was underway.

That was underscored by the report from the Commerce Department on Thursday, which also showed the economy growing steadily last quarter when measured from the income side. This fits in with recent solid readings on the labor market, retail sales and industrial production.

Gross domestic product shrank at a 0.6% annualized rate last quarter, the government said in its second estimate of GDP. That