The economy expanded more in the second quarter than in the first thanks to tax rebates that encouraged consumer spending, but the increase was less than economists had expected, the Associated Press reported.

The gross domestic product (GDP) increased at an annual rate of 1.9 percent in the April to June period, compared with 0.9 percent in the first quarter. Economists had forecast the economy would grow at a 2.4 percent pace.

The Commerce Department also reported that the GDP actually contracted by an annual rate of 0.2 percent in the last three months of 2007 as a result of deep cuts by homebuilders and caution among consumers. The Commerce Department originally had estimated that the economy had grown at a 0.6 percent rate. The fourth-quarter fall was the worst performance since the third quarter of 2001, when the economy was last in recession.

The second quarter was boosted by a 1.5 percent increase in consumer spending, compared with 0.9 percent in the first quarter. Sales of U.S. exports also grew at a 9.2 percent pace, compared with a 5.1 percent growth rate in the first quarter.

Still, the housing slump continued to inhibit growth, with builders cutting back on residential projects by 15.6 percent on an annualized basis. However, that cut was not as deep as the 25.1 percent cut made in the first quarter. Businesses also cut spending on equipment and software and reduced investment in inventories.