The U.S. economy contracted just 0.7 per cent during the three months ending in June, the Commerce Department reported Wednesday.

The department had earlier estimated that the American gross domestic product Spthe most widely-watched measure of U.S. economic health — was shrinking at a rate of one per cent so this new data suggested the recession is easing and that by now the economy might actually be growing again.

Second quarter U.S. GDP contracted just 0.7 per cent, suggesting the worst of the recession may be over. (Paul Sakuma/Associated Press)

The reason for the improvement: businesses didn't cut back spending on equipment and software as much as the government had earlier estimated.

Some economists have predicted the production of goods and services in the U.S. is now growing at a rate that will amount to three per cent over the next 12 months, in part because of the federal $787 billion US stimulus spending and the now ended Cash for Clunkers program — rebates of up to $4,500 to trade in old cars buy new fuel-efficient models.

The data was an improvement over that from the first quarter of 2009 which, if projected out over 12 months, was indicating that the economy would contract by 6.4 per cent. The rate for the final quarter of 2008 was 5.4 per cent

With files from The Canadian Press