New GDP Data Point to Continuing Economic Expansion, Analysts Say

The U.S. economy grew slightly less vigorously in the first quarter than previously thought, the Commerce Department said Thursday, partly because of a swelling trade gap.

But corporate profits surged at the strongest rate in four years as consumers used stock profits and rising incomes to increase their spending at the fastest clip in a decade. Analysts said these developments signal a continuing expansion ahead.

The nation’s gross domestic product--the broadest measure of total economic activity within U.S. borders--grew at a revised 4.1% annualized rate in the first quarter, down from the previous estimate of 4.5%, the Commerce Department said.

That was a slowdown from the previous quarter, when GDP shot ahead at a 6% annual rate, but, analysts warned, probably not enough to offer reassurance to Federal Reserve policymakers worried about the inflationary threat of above-average growth.

“The Fed will not take any solace from this report, since its implications are for continued robust economic gains,” said economist Joel Naroff of Naroff Economic Advisors in Holland, Pa.

The revised GDP estimate reflects a bigger bulge in cheaper-priced imports than the government had estimated earlier, in addition to weaker exports and less production of goods for inventories than was reported a month ago.

Naroff noted that those may be temporary restraints, however, since recovering Asian markets will mean less drag from trade in the second half as overseas sales grow, forcing producers to resume a faster pace of inventory-building.

The prices component of the revised GDP report was little changed. The GDP price deflator that is widely tracked by investors was steady at a 1.4% rate of annual rise, but that is up from 0.8% for the last quarter of 1998.

After-tax corporate profits grew by 4.3% to a seasonally adjusted annualized rate of $492.6 billion, for the biggest increase since a 7.9% rise in the first quarter of 1995.

The Labor Department reported that the number of Americans filing new claims for state unemployment compensation remained at a seasonally adjusted 300,000 for the second week, in line with expectations.

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(National Edition) Gross Domestic Product

Percentage change from previous quarter, annualized rate:

1st quarter: +4.1%

Source: Commerce Department