The US economy grew at an annual rate of 4 percent in the second quarter of 2007, the fastest pace since the first quarter of 2006, the Commerce Department reported yesterday.

The growth in the gross domestic product (GDP), the output of goods and services produced by labor and property located in the Untied States, was stronger than the 3.4-percent rate previously estimated and followed a 0.6-percent increase in the first three months.

The acceleration in GDP growth in the second quarter primarily reflected an improving trade deficit, with stronger export sales and fewer imports.

In the second quarter, US exports of goods and services rose by 7.6 percent, compared with an increase of 1.1 percent in the first. Imports of goods and services fell 3.2 percent, in contrast to an advance of 3.9 percent in the first.

Business investment, in the form of restocking of inventories, and construction of shopping centers, office buildings and other nonresidential projects was also stronger than previously estimated.

Consumer spending, which accounts for two-thirds of overall economic activity, was up 1.4 percent, much slower than the 3.7-percent pace in the first quarter.

Residential fixed investment dropped 11.6 percent in the second quarter. That marked the sixth consecutive quarterly decline in this field but the drop was not as steep as the 16.3-percent decrease in the first quarter.

The 4-percent GDP revision was slightly below the 4.1-percent gain economists had been expecting for the second quarter.

"Core" prices, an inflation gauge closely watched by the Federal Reserve, rose by 2 percent in the second quarter, compared to a year ago. That was down from the 2.4-percent pace in the first quarter.

GDP is considered the best barometer of the country's economic fitness. Core prices exclude volatile energy and food.

Many analysts say that economic growth is likely to slow in the rest of this year, dragged down by the housing slump and the recent turmoil in financial markets.