GDP: Fastest Pace in More Than Two Years
Jun 27 9:36am ET
By Joanne Morrison
WASHINGTON (Reuters) - The U.S. economy raced ahead at its fastest clip in more
than two years in the first quarter, up from earlier estimates and reflecting a
better-than-expected showing for consumer spending and business investment, the
government said on Thursday.
U.S. gross domestic product (GDP), the broadest measure of goods and services
produced within the country's borders, grew at a revised 6.1 percent seasonally
adjusted annual rate during the first three months of this year, up from an earlier
estimate of 5.6 percent, the Commerce Department said in its final reading for the
quarter.
"The stronger than expected GDP number confirms that the U.S. did not really
experience a recession in classic terms, but instead experienced an economic
slowdown," said Edgar Peters, chief investment officer at PanAgora Asset
Management in Boston.
Still, the government's latest GDP estimate beat Wall Street expectations but the
number is unlikely to reassure financial markets shell-shocked by a series of corporate
accounting scandals and worried about signs the economic recovery has since
become more uneven.
Economists in a Reuters poll forecast, on average, that U.S. GDP growth would
remain at a 5.6 percent annual rate for the quarter.
"The economy is experiencing a mild recovery from a mild slowdown. Disappointment
came because everyone expected a more pronounced recovery after a severe
recession," said Peters.
Consumer spending, which fuels two-thirds of the economy, grew at a 3.3 percent
annual rate during the quarter, up slightly from the earlier 3.2 percent estimate. A
smaller decline than first estimated in consumer purchases of durable goods,
big-ticket items intended to last for several years, helped push up the spending figure.
Business spending -- which Federal Reserve officials regard as crucial to a sustainable
economic expansion -- declined during the first three months of the year but not as
sharply as previous estimates. According to the report, business investment fell at a
6.2 percent annual rate, a smaller drop than the previously estimated 8.2 percent
decrease.
In one bright light, while businesses did not break ground on new plants, spending on
equipment and software was up 0.1 percent, the first gain since the third quarter of
2000.
The biggest surge in defense spending since 1967 following the Sept. 11 attacks also
helped push up GDP growth during the quarter. |
