The U.S. economy picked up some steam in the second quarter, but still failed to meet the expectations of economists.

The U.S. Commerce Department reported Thursday that the gross domestic product hit an annualized rate of 1.9 per cent for the April-June quarter, an improvement from the weak 0.9 per cent rate posted in the first quarter.

Economists had been projecting a second-quarter growth rate of 2.4 per cent.

"It's not as good as we'd like it to be, but I want to remind you a few months ago there were predictions that the economy would shrink this quarter," said President George W. Bush.

Market watchers are worried the U.S. economy could retreat once the effect wears off from the government's recent tax rebate cheques.

Higher consumer spending and U.S. export shipments helped bolster the economy in the second quarter. Consumer spending grew by an annualized 1.5 per cent, while export sales rose at an annual rate of 9.2 per cent.

Housing-sector weakness continued to act as a drag on GDP. Builders cut back on residential projects by 15.6 per cent, on an annualized basis, although that was better than the first quarter's -25.1 per cent rate or the fourth quarter's -27 per cent annual rate.

Despite the weaker than expected reading on U.S. GDP, "the report is unlikely to sway the [Federal] Reserve's interest rate decision next week in either direction, since output growth in 2008 is likely to remain in line with the Fed’s central tendency of one per cent to 1.6 per cent," said Millan Mulraine, economics strategist at TD Securities.

The U.S. government also revised the fourth-quarter GDP figure for 2007 downward to show an annualized contraction of 0.2 per cent — the weakest quarter since the July-September quarter of 2001 when the U.S. was in recession. The original report on the fourth quarter showed annualized growth of 0.6 per cent.

With files from Associated Press