Economic Growth Hits Highest Rate in Decade

Economic growth skyrocketed during the first three months of the year at the most rapid rate in a decade. But it was too fast to last, and analysts already see abundant signs that the economy is coming back to Earth.

The gross domestic product--the total of all goods and services produced in the United States--expanded at a 5.8% seasonally adjusted annual rate in the first quarter, even higher than an earlier estimate of 5.6%, the Commerce Department said Friday.

This year’s first quarter marked the fastest growth since the fourth quarter of 1987, when it posted a 6% expansion rate. But, as with most good things, it must come to an end, economists said.

Analysts said GDP peaked in the first quarter and was headed for subdued growth for the rest of the year, likely in the range of 2% to 2.5%. But they were split over whether it will ease enough to head off more hikes in interest rates by the Federal Reserve Board.

A separate Commerce report on Friday showing that new-home sales dropped in April at the sharpest rate in six months fit with other recent indicators of continued slowing in the second quarter.

Sales fell 7.7% to a seasonally adjusted annual rate of 772,000 units. But that came after a steep revision to March sales to show a 2% increase to 836,000--the strongest pace since 857,000 a year in April 1986.

A third report from the Purchasing Management Assn. of Chicago said its Chicagoland Business Barometer fell to a seasonally adjusted 56.8 in May from 57.2 in April. Although any reading over 50 signals growth, the rate was slightly less vigorous.