Secondquarter GDP contraction revised to 0.6 from 0.9
Gross domestic income rises at 1.4 rate in Q2
Average of GDP and GDI climbs at 0.4 pace
Weekly jobless claims drop 2,000 to 243,000

WASHINGTON, Aug 25 Reuters The U.S. economy contracted at a more moderate pace than initially thought in the second quarter as consumer spending blunted some of the drag from a slower pace of inventory accumulation, dispelling fears that a recession was underway.

That was underscored by the report from the Commerce Department on Thursday, which also showed the economy growing steadily last quarter when measured from the income side. This fits in with recent solid readings on the labor market, retail sales and industrial production.

Gross domestic product shrank at a 0.6 annualized rate last quarter, the government said in its second estimate of GDP. That was an upward revision from the previously estimated 0.9 pace of decline. The economy contracted at a 1.6 rate in the first quarter. Economists polled by Reuters had expected GDP would be revised slightly up to show output falling at a 0.8 rate.

While the two straight quarterly decreases in GDP meet the standard definition of a technical recession, broader measures of economic activity suggest a slow pace of expansion rather than a downturn.

An alternative measure of growth, gross domestic income, or GDI, increased at a 1.4 rate in the second quarter. GDI, which measures the economy39;s performance from the income side, increased…