Growth in First Quarter Revised Upward, to 3.5%
U.S. economic activity advanced at a solid 3.5% pace in the first quarter, somewhat better than initially thought, the government said Thursday.
The new reading on gross domestic product raised hopes that there was enough momentum to maintain the expansion and job growth this year.
The new GDP figure from the Commerce Department represented an upgrade from the 3.1% annualized growth rate first estimated for the quarter. That pace would have been the slowest in two years.
“The upward revision shows that [slowdown] concerns were somewhat exaggerated,” said Lynn Reaser, economist at Banc of America Capital Management. “The ‘soft patch’ appears to have been short and fleeting.”
The higher estimate mostly reflected a slight improvement in the nation’s trade deficit, which was less of a drag on the economy than previously thought. Brisk spending on housing also helped.
GDP measures the value of all goods and services produced within the U.S.
The 3.5% rate was down a bit from the 3.8% of the final quarter of 2004. High oil prices crimped spending by consumers and businesses in the first quarter.
But more recent data on retail sales, orders for big-ticket manufactured goods, home sales and hiring suggest the economy snapped out of its funk in April.
In an accompanying report, the Commerce Department said corporate earnings grew 4.5% in the first quarter to a seasonally adjusted annual rate of $1.33 trillion. Although the growth rate declined from the 13.5% pace of the fourth quarter, total earnings were the equivalent of 10.9% of the entire economy -- the largest share of GDP since 1967.
Analysts said strong earnings could continue to lift business capital spending, which rose at a 5.6% rate in the first quarter, down from 18.4% in the fourth quarter, when an expiring tax break helped boost spending.
Separately, the Labor Department said new claims for unemployment insurance rose by 1,000 to 323,000 last week. That level still points to an improving job market, analysts said.
