New figures show that the number of Americans claiming new unemployment benefits fell to a five-month low last week, while the economy grew slightly more than previously reported in the second quarter.
Initial claims for state unemployment benefits fell 37,000 to a seasonally adjusted 391,000, the Labor Department said. This was well below economists' expectations for 420,000.
Separately, gross domestic product grew at annual rate of 1.3% in the second quarter, the Commerce Department said in its third and final estimate. This was up from the previously estimated 1%.
That reflected consumer spending and export growth that was stronger than earlier estimated.
Analysts said the two sets of figures meant the prospect of the US economy slipping back into recession was less likely.
Political haggling in Washington over budget policy and a deepening debt crisis in Europe have eroded confidence, leaving the US economy on the brink of a new recession.
The revision to GDP was a touch above economists' expectations for a 1.2% pace and took GDP growth back to the government's original estimate of 1.3%. The economy expanded at a 0.4% rate in the first three months of the year.
The GDP report also showed after-tax corporate profits rising at a 4.3% rate in the second quarter, the largest increase in a year, instead of 4.1%.
Consumer spending growth was revised up to a 0.7% rate from 0.4%. The increase in spending, which accounts for more than two-thirds of U. economic activity, was still the smallest since the fourth quarter of 2009.
Export growth was stronger than previously estimated, rising at a 3.6% rate instead of 3.1%. Imports increased at a 1.4% rate rather than 1.9%, meaning a smaller trade deficit.
The GDP report also showed inflation pressures remaining high during the quarter, with the personal consumption expenditures price index rising at a revised 3.3% rate. That compared to 3.9% in the first quarter.
The core PCE index closely watched by the Federal Reserve advanced at a 2.3% rate, the largest increase since the second quarter of 2008. It was revised up from 2.2%.
