US economy shrinks lesser than expected

A separate report from the Labor Department showed the number of US workers filing new claims for jobless benefits fell by 10,000 to 570,000 last week,suggesting firms were not firing staff as aggressively as they did early in the year.

8220;Everything around the data indicates that we are in a normal recovery out of a deep recession. The recovery probably started this summer,8221; said Brett D8217;Arcy,chief investment officer at CBIZ Wealth Management in San Diego,California.

The US economy appears to be emerging from its longest and deepest recession since the Great Depression of the 1930s.

The fairly positive data had little impact on the US stock market,whose direction was determined by changes in the oil price. For more on stocks,see. US government bond prices fell,despite a solid auction.

The GDP report showed businesses were more aggressive in reducing inventories than previously thought.

Business inventories dropped a record 159.2 billion in the second quarter,more than the 141.1 billion estimated last month. Stripping out inventories,GDP rose 0.4 per cent 8212; the first gain since the second quarter of 2008.

Analysts said the sharp drawdown in inventories in the face of weak demand had likely run its course,and that the lean level of stocks would provide a springboard for an economic recovery many believe is already under way.