U.S. Raises Estimate of GDP Growth

The U.S. economy showed even more pep than initially thought in the first quarter, zipping ahead at a 5.3% annual pace, the government reported Thursday. But a less energetic housing market and high energy prices are now taking away some of the oomph.

“I think we sort of had the last hurrah for the economy for a while,” said Nariman Behravesh, chief economist with Global Insight. “We aren’t going to see this kind of growth for a bit. We will see softening in the economy, but there’s no reason to be pessimistic.”

The first-quarter growth rate released Thursday by the Commerce Department was up from a 4.8% estimate the government had put out last month, and marked the strongest spurt in 2 1/2 years.

The revision mostly reflected stronger U.S. exports and inventory building by businesses.

The gross domestic product, a measure of the value of all goods and services produced within the United States, totaled $11.39 trillion in the first quarter, after being annualized and adjusted for inflation.

President Bush, coping with his lowest job-approval ratings, said the report provided evidence that “America’s economy is on the fast track.”

Some barometers, though, suggest that economic growth may be moderating.

The housing market, once a star economic performer, is losing some of its shine as mortgage rates move up. Sales of previously owned homes fell 2% in April to a pace of 6.76 million units, the National Assn. of Realtors said.

House prices posted the smallest increase in 4 1/2 years. The total number of unsold homes climbed to a record high of 3.38 million units.

“An orderly retrenchment of the market is what all of us have been hoping for, and that is what we are getting, at least for now,” said Joel Naroff of Naroff Economic Advisors, who expressed concern about the backlog in unsold homes.

Economists predict that economic growth in the current April-to-June quarter will come in at a pace of 3% to 3.5%, still a respectable rate. The housing market and energy prices will play key roles in shaping the outcome.

The Federal Reserve is keeping tabs on the effect a less energetic housing market and high energy prices may have on economic activity.

The Fed also is monitoring whether energy feeds into the costs of other goods and services and spreads inflation throughout the economy.

An inflation gauge showed “core” prices -- excluding food and energy -- rose in the first quarter by an annualized 2%, considered the boundary of the Fed’s inflation comfort zone.

The reading was taken before oil prices shot up to a record of $75.17 a barrel in late April. Oil prices are now hovering above $71 a barrel.

Consumers boosted spending at a 5.2% pace in the quarter, slightly less than the 5.5% first estimated.

Business spending on equipment and software, meanwhile, zoomed 13.8%. However, that wasn’t as robust as the 16.4% growth rate initially calculated.

Separately, the Labor Department said new filings for unemployment benefits plunged by 40,000 to 329,000 last week as the end of a partial government shutdown in Puerto Rico took people off the unemployment rolls.