Bloomberg News

The U.S. economy expanded at a faster pace in the second quarter as a smaller trade deficit and gains in inventories overshadowed the effects of federal budget cutbacks.

Gross domestic product rose at a 2.5 percent annualized rate, up from an initial estimate of 1.7 percent, Commerce Department figures showed Thursday in a Washington report.

The improvement is consistent with projections that the U.S. is weathering the fallout of government budget cuts and higher taxes and is poised to pick up once those restraints fade.

Gains in employment and home prices that are shoring up confidence signal households will sustain spending, the biggest part of the economy.

“The economy is doing fine,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who projected a 2.5 percent gain in GDP.

“It is going to weather the sequestration. Growth will accelerate in the second half.”