The U.S. economy grew solidly at a 3.4 percent annual rate in the second quarter, the government reported Friday, just slightly below the first quarter's pace and with room to grow as stocks of unsold goods fell for the first time in two years.

While second-quarter growth eased from a 3.8 percent rate in the first three months of the year, it nonetheless marked the ninth straight quarter in which gross domestic product (search), or GDP, increased at a rate exceeding 3 percent, Commerce Department figures showed.

The first snapshot of second-quarter GDP matched Wall Street (search) economists' expectations. The figure will be revised twice in coming months as more data on the economy's performance arrive.

GDP measures the value of all goods and services produced within U.S. borders.

Most measures of activity remained healthy in the second quarter, with consumer spending increasing at a 3.3 percent rate after growing at a 3.5 percent rate in the first quarter. Business investment advanced at a 9 percent rate after growing 5.7 percent in the first three months of the year.

Companies drew down inventories at a $6.4-billion annual rate during the second quarter — the first time they reduced stocks since the second quarter of 2003 — after boosting them by $58.2 billion in the first quarter. Much of the drawdown appeared to be related to carmakers clearing the way for new models but, in general, lower inventories leave room for companies to ramp up future production.

Overall prices kicked up in the second quarter, influenced by more expensive oil and gasoline. A personal consumption expenditures gauge that is often taken as a measure of inflation climbed at a 3.3 percent rate that topped the first quarter's 2.3 percent and represented the strongest rate of prices gain in a year.

But excluding volatile food and energy costs, the PCE gauge was up at a more modest 1.8 percent rate, actually lower than the first quarter's 2.4 percent.

The second-quarter GDP data also included annual revisions reaching back to the beginning of 2002. They showed a weaker recovery from a relatively mild recession in 2001 than previously thought, but did not change the pattern of growth as the recovery heads toward its fourth anniversary in the final quarter this year.

The revised data showed GDP growth in 2004 was 4.2 percent, rather than 4.4 percent, 2003 growth was 2.7 percent not 3 percent and 2002 growth was 1.6 percent rather than 1.9 percent.