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Gross domestic product grew at annual rate of 1.3 percent, the Commerce Department said in its third and final estimate for the quarter, up from the previously estimated 1.0 percent.

The revision was a touch above economists' expectations for a 1.2 percent pace and took GDP growth back to the government's original estimate of 1.3 percent. The economy expanded at a 0.4 percent rate in the first three months of the year.

While the expenditure side of the economy showed severe weakness in the first half, economic activity as measured by income fared a little better. Gross domestic income rose at a 1.3 percent rate in the second quarter after increasing 2.4 percent in the first quarter.

The report also showed after-tax corporate profits rising at a 4.3 percent rate in the second quarter, the largest increase in a year, instead of 4.1 percent. Profit ticked up 0.1 percent in the first quarter.

Political haggling in Washington over budget policy and a deepening debt crisis in Europe have eroded confidence, leaving the U.S. economy on the brink of a new recession.

There is cautious optimism the economy will skirt another downturn as factory output continues to expand, although at a slower pace than earlier in the recovery, and businesses maintain their appetite for spending on capital goods.

Details of the GDP revisions also were consistent with an economy that is on a slow growth track rather than sliding back into recession.

Consumer spending growth was revised up to a 0.7 percent rate from 0.4 percent. The increase in spending, which accounts for more than two-thirds of U.S. economic activity, was still the smallest since the fourth quarter of 2009.

Export growth was stronger than previously estimated, rising at a 3.6 percent rate instead of 3.1 percent. Imports increased at a 1.4 percent rate rather than 1.9 percent.

That left a smaller trade deficit, and trade contributed 0.24 percentage point to GDP growth.

Businesses accumulated less stock than previously estimated in the quarter, which should support growth in the July-September quarter. Business inventories increased $39.1 billion instead of $40.6 billion, cutting 0.28 percentage point from GDP growth during the quarter.

Excluding inventories, the economy grew at a 1.6 percent pace instead of 1.2 percent.

Business spending was revised to a 10.3 percent rate from 9.9 percent rate as investment in nonresidential structures offset a slight slowdown in outlays in equipment and software. Spending on nonresidential structures was the fastest since the third quarter of 2007.

The GDP report also showed inflation pressures remaining elevated during the quarter, with the personal consumption expenditures price index rising at a revised 3.3 percent rate. That compared to 3.9 percent in the first quarter.

The core PCE index closely watched by the Federal Reserve advanced at a 2.3 percent rate, the largest increase since the second quarter of 2008. It was revised up from 2.2 percent. (Reporting by Lucia Mutikani, Editing by Andrea Ricci)

* The final (third) Q2 estimate for gross domestic product (GDP) will be released at 1230 GMT. Economists forecast a 1.2 percent annualized pace of growth, compared with a 1.0 percent rate in the preliminary (second) estimate.

* First-time claims for jobless benefits for the week ended September 24 are due at 1230 GMT. Economists predict a total of 420,000 new filings, compared with 423,000 in the prior week.

* At 1400 GMT, National Association of Realtors issues Pending Home Sales for August. Economists expect a 1.8 percent drop, compared with a 1.3 percent drop in the previous month.

* The Labor Department issues at 1230 GMT preliminary annual benchmark revision to U.S. nonfarm payrolls for the five years ended March 2011.

* At 1230 GMT, the Commerce Department issues revised Q2 Corporate Profits. In the preliminary Q2 report, profits rose 4.1 percent.

* Hewlett-Packard Co (HPQ.N) has hired Goldman Sachs Group Inc (GS.N) to help the company defend itself against possible activist investors who could push for change, the Wall Street Journal reported.

* Asian technology companies came under pressure on Thursday to slash prices of their tablet computers after Amazon.com (AMZN.O) launched its Kindle Fire at a mass market-friendly $199.

* Workers represented by the United Auto Workers union approved on Wednesday a four-year labor contract with General Motors (GM.N), the first such deal for the top U.S. automaker since its 2009 bankruptcy.

* The FTSEurofirst 300 .FTEU3 index of top European shares was up 0.2 percent in choppy trade, after opening lower, ahead of a German vote to ratify new powers on the euro zone rescue fund.

* International auditors return to Athens on Thursday to deliver a verdict on whether Greece's tougher austerity measures qualify for aid to avert a default that would plunge the country into bankruptcy.

* Japan's Nikkei average .N225 reversed losses to retake the 8,700 level for the first time in over a week, on a rush of buying in the final half-hour of trade as some commodities and U.S. stock futures recovered.

* Commodity-related stocks drove Wall Street lower on Wednesday as stiff declines in energy and metals prices underscored investor concerns about global economic weakness and Europe's debt crisis.

* The Dow Jones industrial average .DJI dropped 179.79 points, or 1.61 percent, to 11,010.90. The Standard & Poor's 500 Index .SPX dropped 24.32 points, or 2.07 percent, to 1,151.06. The Nasdaq Composite Index .IXIC dropped 55.25 points, or 2.17 percent, to 2,491.58.

Support from the center-left opposition will ensure Germany passes the bill on new powers for the European Financial Stability Facility (EFSF), which some countries like Finland have ratified but others, including Slovakia, are disputing.

But if dissent in her coalition forces Merkel to rely on opposition votes to pass the new powers for the 440 billion euro ($600 billion) rescue fund, it would be politically damaging for the conservative chancellor.

Merkel's Christian Democrats (CDU) and their allies were pressuring the handful of dissidents to get in line before the vote at 11 a.m. (4 a.m. EDT). It should be clear about half an hour after that the EFSF has been passed, but word on how many government lawmakers rebelled could take another hour.

"We are working to convince people," CDU second-in-command Hermann Groehe told Reuters. He said "it will be close" but the government would not put itself in the humiliating position of depending on the Social Democrats (SPD) and Greens.

Merkel tried to assure her coalition that German taxpayers' money would not be wasted by voting a new bailout for Athens -- but she could not rule out that the money might be written off if, as financial markets increasingly fear, Greece defaults.

Merkel often is accused in Europe and at home of dithering on the euro crisis and if she does not win the EFSF vote on her own terms, it would damage her hopes of taking the conservative bloc she has led for 11 years into the next elections in 2013.

International auditors return to Athens on Thursday to deliver their verdict on whether Greece's tougher austerity measures quality for further aid.

The chancellor has told Greece she wants to wait for the results of an audit by the "troika" of the European Union, European Central Bank and IMF to see whether its findings "tell us we will have to renegotiate or not."

Such talk by Merkel and other German officials may refer to raising the level of private creditor involvement in the Greek bailout, by getting them to accept bigger potential losses -- or "haircuts" -- on their Greek sovereign bond investments.

Senior coalition figures like Economy Minister Philipp Roesler, head of Merkel's Free Democrat (FDP) partners, have already said an "orderly" Greek default should not be taboo.

With a core of naysayers in the CDU, its Bavarian allies the CSU and the FDP, the vote will be scrutinized to see how close she gets to a convincing 311 'yes' votes from her own bloc in the 620-seat Bundestag.

If there are more than 19 rebels, Merkel will have passed the EFSF thanks to the center-left opposition and may have to rethink how to address growing discontent among her supporters and the population at large about the euro zone debt crisis.

Sentiment remains passionately divided in Germany. Even though labor unions called on MPs to back the measure, the conservatives' "Mittelstands und Wirtschaftsvereinigung" (MIT) (small business alliance) urged MPs to vote 'no' on Thursday.

In a statement, the MIT said: "In respect for the free decision of every MP" it expresses its solidarity for the rebels in Merkel's coalition. "It is personally a difficult decision but politically the correct one," the statement said.

The SPD and Greens have won a run of state elections this year and, with two more votes in coming months on the second Greek bailout and a permanent mechanism to succeed the EFSF, can portray themselves as defenders of the single currency.

($1=0.735 euros)

(Additional reporting by Andreas Rinke; Writing by Stephen Brown; Editing by Michael Roddy)

Copper fell below $7,000 a tonne, gold slipped below $1,600 an ounce to stand more than $300 below its record high earlier this month, and commodities-related stocks were dumped.

The past week has seen a broad selloff of commodities, equities and emerging markets bonds and a rally in the dollar that has been reminiscent of the rout surrounding the collapse of Lehman Brothers investment bank three years ago.

"Due to the high degree of uncertainty about the European situation and its effects on economic growth, there were anxious market moves in the U.S., and we will see similar moves today," said Yutaka Miura, senior technical analyst at Mizuho Securities.

Tokyo's Nikkei share average fell 0.9 percent, while MSCI's broadest index of Asia Pacific shares outside Japan dropped 1 percent, with its materials sub-index shedding more than 2 percent.

S&P 500 index futures were mildly negative, after Wall Street's broad benchmark dropped 2.1 percent on Wednesday.

The latest source of nervousness was a vote in Germany's parliament at 0900 GMT on Thursday to approve new powers for the euro zone's 440 billion euro ($598 billion) rescue fund.

Whilst opposition votes will ensure the bill passes, a big rebellion within Chancellor Angela Merkel's own center-right coalition could weaken her politically and cloud future policy making at a time when financial markets and other nations are urging euro zone leaders to act boldly and decisively.

The euro was little changed around $1.3540, while the dollar rose 0.3 percent against a basket of currencies.

"You would suspect weakness until Germany votes, given that it is the big guy that has to fund it," said Gavin Stacey, head of Australia and New Zealand research at Barclays Capital.

"The euro is most likely to continue its trend deterioration until it gets really bad, forcing a resolution to come."

As the commodities rout continued, gold fell 0.7 percent to around $1,596 an ounce and copper, which is highly sensitive to expectations for global growth, fell 4.9 percent to $6,898 a tonne.

U.S. crude oil futures fell 1.3 percent to $80.17 a barrel and Brent crude lost 0.8 percent to $103. ($1 = 0.735 Euros)

(Editing by Yoko Nishikawa)

In his first public remarks since the Fed launched a fresh measure aimed at keeping down long-term borrowing costs, Bernanke indicated a willingness to push deeper into the realm of unconventional policy if economic growth remains anemic.

"It is something that we're going to be watching very carefully," Bernanke said in response to questions from the audience at a forum sponsored by the Cleveland Fed.

"If inflation falls too low or inflation expectations fall too low, that would be something we have to respond to because we do not want deflation," Bernanke said.

The comment was made in response to a question about a recent decline in market-based inflation expectations, which policymakers see as a good gauge of future inflation trends.

The gap between yields on 10-year Treasury notes and their inflation-protected counterparts fell to 1.70 percent last week, the lowest since September 2010. It has edged up slightly since then and last stood at 1.86 percent.

In an effort to stanch the deepest recession in generations and help the recovery, the Fed not only slashed benchmark interest rates to effectively zero, but also more than tripled its balance sheet to around $2.9 trillion.

Despite these measures, growth has remained quite soft, averaging less than 1 percent on an annual basis in the first half of the year. Bernanke signaled he remains concerned about risks to the economy, which the Fed described as "significant" in its September policy statement.

"We have a lot of problems both in terms of recovery and in terms of longer-term growth," he said.

A TWIST ON HOUSING

Last week, the Fed said it will sell $400 billion in short-term Treasury securities and invest them into longer-dated ones to try to put downward pressure on borrowing costs over a longer period.

Investors have dubbed the program Operation Twist after a similar measure undertaken by the Fed in the 1960s. The central bank will also renew its help to the housing finance sector by reinvesting maturing mortgage bonds in its portfolio back into that market.

Bernanke called for the U.S. government to beef up its assistance to the ailing housing sector, the epicenter of the 2008 financial meltdown.

"Some strong housing policies to help the housing market recovery would clearly be very useful and would allow the monetary policy actions of the Fed ... to have more effect and to help the economy recovery more strongly," Bernanke said.

Asked about the fate of fallen mortgage giants Fannie Mae and Freddie Mac, Bernanke reiterated his view that the mortgage market remains too weak to allow the government to try to privatize the government-sponsored entities.

The Fed's latest monetary easing did not have unanimous support within the Federal Open Market Committee, which sets monetary policy.

Three regional central bank presidents dissented against the move. Kansas City Fed President Thomas Hoenig, who does not have a vote on the committee this year but has been a vocal opponent of the Fed's unconventional policies, took a parting shot at the central bank's actions on Wednesday.

"When you encourage consumption by inhibiting your interest rates from rising to their equilibrium level, you will in fact buy problems, and we have, in fact, bought problems," said Hoenig, who is due to retire on October 1, in his last speech in office.

(Reporting by Kim Palmer, Pedro da Costa and David Lawder in Washington; Editing by Padraic Cassidy)