INSTANT VIEW: Growth rises modestly in 2nd qtr

NEW YORK (Reuters) - The U.S. expansion accelerated modestly in the second quarter as government stimulus payments helped consumers add more buying punch to the economy, a Commerce Department report on Thursday showed.

The number of U.S. workers filing new claims for jobless benefits leapt 44,000 last week, government data on Thursday showed, but a Labor Department official said the increase was at least partly due to special factors.

KEY POINTS:

* Gross Domestic Product or GDP grew at a 1.9 percent annual rate, up from a revised 0.9 percent rate in the first quarter that previously was reported as 1 percent.

* Economists surveyed by Reuters had expected a 2.0 percent rise in GDP in the second quarter.

* That followed a 0.2 percent contraction in GDP during the final quarter of 2007 and avoided pushing the economy into back-to-back declines that would have met a popular definition of recession.

* Businesses reduced inventories at the sharpest rate since the end of 2001 in a sign they anticipate restrained growth ahead.

COMMENTS:

ROBERT MACINTOSH, CHIEF ECONOMIST, EATON VANCE MANAGEMENT, BOSTON:

"We're in a recession. I don't know how they get the 1.9 in the second quarter. It's almost unconscionable that they go back seven months to take away eight-tenths of a percent, which makes it a negative quarter back in the fourth quarter.

"They already had three shots at that number, why did it change so much? Now its actually negative, at least psychologically, that's a huge difference.

"I think the most troubling thing out of all the numbers this morning is the claims number. If that doesn't convince people we're in a recession, then nothing will.

"If the stock market feels like the Fed is not going to increase and in fact may actually cut rates, it's probably going to like that. Perverse as it may sound, equities may actually like what we found.