This more in-depth piece about the economic numbers describes some very interesting statistics. Strangely, Google doesn't have one article on its front page news in the business section.
U.S. Economy Grows 3.8% for a Second Straight Quarter
June 29 (Bloomberg) -- The U.S. economy grew at a 3.8 percent annual rate from January through March, matching the pace in the previous three months and suggesting Federal Reserve policy makers will keep raising interest rates to ensure inflation doesn't accelerate.
The final estimate of gross domestic product, the total volume of goods and services produced in the U.S., compares with the 3.5 percent rate that was reported May 26, the Commerce Department said today in Washington. Inflation rose at a slower pace than the government reported last month.
Growth now has exceeded 3 percent for eight straight quarters, the longest stretch in almost two decades. U.S. Treasury securities rose after the report suggested the world's largest economy will keep expanding while interest-rate increases by Fed policy makers, meeting today and tomorrow, keep a lid on inflation. The report confirms rising oil prices in the first quarter did little to slow growth.
``It gives us a better idea of how strong we were in the first quarter and how we were able to shake away the soft patch as easy as we did,' said John Herrmann, director of economic commentary at Cantor Fitzgerald LP in New York. ``The U.S. economy is unbelievably resilient to all these shocks.'
The first quarter may prove the strongest three months of growth this year, economists said. The economy will probably expand at a 3.3 percent annual rate in the current quarter that ends tomorrow, according to a Bloomberg News survey of economists earlier this month. Growth in the second half will be similar.
Forecast Exceeded
``So far the consumer has been able to weather the effect of rising gas prices,' said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi Ltd. in New York, who correctly forecast first-quarter growth. ``It's unrealistic to think that the U.S. can get through this period without some pain,' he said.
A smaller trade deficit and home construction that increased more than initially estimated contributed to the first-quarter revision. The median forecast in a Bloomberg News survey of 71 economists called for a 3.7 percent pace in the first quarter. The government's first estimate of growth, on April 28, was 3.1 percent.
``The economy is showing solid and sustained growth in job creation,' White House spokesman Scott McClellan told reporters.
The yield on the benchmark 10-year note fell 3 basis points to 3.94 percent at 10:48 a.m. in New York, according to bond broker Cantor Fitzgerald LP.
Annual GDP
GDP rose to $11.1 trillion when annualized and adjusted for inflation. Without adjustment, the economy grew at a 6.7 percent annual pace, the strongest in a year, to $12.2 trillion for the quarter compared with 6.2 percent in the previous three months.
``It's in line with what we're seeing as far as job growth is concerned,' said Andrew McKelvey, chief executive officer and co- founder of Monster Worldwide Inc., in an interview. ``The hiring managers are very optimistic. They're already telling us we posted more jobs than we thought and we're going to need more before the end of the year.' Monster is the most-used Web site for employment advertising.
The core personal consumption expenditures price index, a measure tied to consumer spending that excludes energy and food, rose 2 percent, revised from a previous estimate of 2.2 percent. The rate, watched by Fed policy makers, increased 1.7 percent in the final three months of last year.
Fed
U.S. central bankers will raise their overnight bank lending rate a quarter percentage point to 3.25 percent, the ninth straight increase, at the conclusion of their two-day meeting tomorrow, based on the median estimate in a Bloomberg News survey of economists.
``The reality is that growth hasn't stopped, oil is at $60 a barrel and the pressures are still there,' said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania. ``If those pressures do seep into the system they've got inflation, and they're trying to preempt that.'
The pace of first-quarter economic growth was faster than the 3 percent annual average during the past three decades. The last time growth exceeded 3 percent for eight or more quarters was from January-March 1983 to the first three months of 1986.
The U.S. economy remains the strongest of all major industrialized nations.
Global Growth
U.S. growth this year is forecast at 3.5 percent, according to a Bloomberg survey of economists earlier this month. The European Central Bank projected earlier this month that Europe's economy will grow 1.4 percent this year. The European Commission predicts the economy in the U.S. will outpace the euro region for a 13th year in 14.
In Japan, the economy grew 1.3 percent in the first quarter compared with the same three months last year. By comparison, the U.S. economy expanded 3.7 percent from a year ago. Higher energy costs are weighing on global growth. Crude oil closed at a record $60.54 a barrel in New York on June 27; the price fell to $57.20 as of 10:55 a.m. today.
Southwest Airlines Co., the only major U.S. carrier to remain profitable since 2001, said rising fuel prices and low fares will prolong losses in the industry. ``Energy prices are driving everything right now,' Southwest Chief Executive Gary Kelly said in a June 24 interview. ``No airline can make money with $50 crude oil prices; now we're up to $60.'
Corporate Profits
The GDP report included corporate profits for the quarter. Earnings adjusted for the value of inventories and depreciation of capital expenditures, or profits from current production, rose 6 percent, compared with an earlier estimate of 4.5 percent and a 13.5 percent gain in the fourth quarter. The fourth-quarter results were distorted by a rebound from the third quarter, when hurricanes caused a 4.8 percent decline.
Current-production cash flow, or the internal funds available to companies for investment, increased 8.4 percent in the first quarter, the biggest rise since the second quarter of 1978.
``Corporations' cash positions have been very strong, and that has implications for business spending,' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut.
Business fixed investment, which includes spending on commercial construction as well as on equipment and software, rose at a 4.1 percent annual rate in the first quarter. That compares with the preliminary first-quarter estimate of 3.5 percent and a 14.5 percent gain in the fourth quarter.
Business Spending
Spending on equipment and software grew at a 6.1 percent annual rate. The government earlier estimated such spending grew at a 5.6 percent rate after an 18.4 percent gain in the fourth quarter.
The U.S. trade deficit subtracted 0.58 percentage point from first-quarter growth, compared with 0.67 percentage point estimated in the government's preliminary report.
Residential construction increased at an 11.5 percent annual rate in the first quarter, revised from an 8.8 percent pace estimated last month. At the same time, the government's measures on prices were revised down in part because prices of single- family homes rose less than initially reported.
Consumer spending, which accounts for more than two-thirds of the economy, expanded at a 3.6 percent annual pace, the same as estimated last month and compared with a 4.2 percent rise in the fourth quarter. Last year's consumer spending growth of 3.8 percent was the most since 2000.
Consumers, Government
Government spending rose at a 0.2 percent pace from January through March, the smallest since the third quarter of 2003, after a 0.9 percent rise in the fourth quarter.
Companies boosted inventories at a revised $66.8 billion annual rate, compared with a preliminary estimate of $68.4 billion and a fourth-quarter increase of $47.2 billion. That contributed 0.72 percentage point to growth, less than the 0.78 percentage point estimated last month.
Real final sales, or GDP minus inventories, increased at a 3 percent annual rate in the first quarter. The earlier estimate was a 2.7 percent annual rate.
The inventory build in the first quarter suggests companies weren't adding as much to stockpiles in the current quarter, which will restrain growth. Rising fuel costs also may have limited corporate investment in plants and equipment as well, economists said.
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