U.S. economic growth unexpectedly accelerated in the second quarter, laying a firmer foundation for the rest of the year that could bring the Federal Reserve a step closer to cutting back its monetary stimulus.



Gross domestic product grew at a 1.7 percent annual rate, the Commerce Department said on Wednesday, stepping up from the first-quarter's downwardly revised 1.1 percent expansion pace.

Economists polled by Reuters had forecast the economy growing at a 1.0 percent pace after a previously reported 1.8 percent advance in the first three months of the year.

A rebound in business spending, export growth and a sharp moderation in the pace of decline in government outlays boosted economic growth in the April-June period, offsetting a slowdown in consumer spending and a steady rate of inventory accumulation.

Still, the report marked a third straight quarter of GDP growth below 2 percent, a pace that normally would be too soft to bring down unemployment. But growth was poised to gain even more momentum in the second half of the year as the fiscal burden brought on by belt-tightening in Washington eases.

Federal Reserve officials, wrestling with a decision on the future of their $85 billion per month bond-buying program, will probably nod to the downward revision to first-quarter growth, but draw comfort from the pick-up in output last quarter, when they wind-up a two-day meeting later on Wednesday.

Fed Chairman Ben Bernanke said last month that the central bank was likely to start curtailing the bond purchases later this year and would probably bring them to a complete halt by the middle of 2014, if the economy progressed as expected.