The US economy accelerated in the second quarter as consumers ramped up spending and businesses invested more on equipment, confirming that the sluggish performance early in the year was temporary.

Gross domestic product increased at a 2.6% annual rate in the April-June period, which included a boost from trade, the Commerce Department said in its advance estimate.

Growth for the first quarter was revised down to a 1.2% rate from the previously reported 1.4% pace. First-quarter growth was the weakest in a year.

The rebound in growth, together with a tightening labour market, likely leaves the Federal Reserve on course to announce a plan to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities in September as well as raise interest rates for a third time this year.

The US central bank left rates unchanged on Wednesday and said it expected to start winding down its portfolio "relatively soon".

The increase in output was in line with economists' expectations.

The dollar fell against a basket of currencies after the release of the data, while prices for US government bonds rose.

The economy grew 1.9% in the first half of 2017, making it unlikely that GDP would top 2.5% for the full year.

President Donald Trump has set an ambitious 3% growth target for 2017.

While the Trump administration has vowed to cut corporate and individual taxes as part of its business-friendly agenda, Republicans' struggles in Congress to pass a healthcare restructuring have left analysts sceptical on the prospects of fiscal stimulus.

So far, the impasse in Washington has not hurt either business and consumer confidence.

A resurgence in consumer spending accounted for the bulk of the pick-up in economic growth in the second quarter.

Consumer spending, which makes up more than two-thirds of the USeconomy, grew at a 2.8% rate.

That was an acceleration from the 1.9% pace logged in the first quarter.

But with wage growth remaining sluggish despite the labour market being near full employment, there are concerns that consumer spending could slow in the third quarter.

Annual wage growth has struggled to break above 2.5%.