Last month, the gross domestic product for the U.S. was estimated to grow at a rate of 3.1% in the first quarter of this year. The rate turned out to be bigger than that according to a report released today by the Commerce Department.
According to the report, the GDP grew at an annual rate of 3.5% for the first quarter. The better-than-expected rate comes as a result of fewer imported goods and services than previously estimated.
“The 3.5 percent pace is really a safe and solid pace for the economy to grow. By that I mean, it is not so fast that you can have an inflationary accident and not too slow to create new jobs,” noted Stuart Hoffman, PNC Financial Services Group’s chief economist. “It is right on the economy’s speed limit.”
The rate is still lower than that of the fourth quarter of last year, which was 3.8%. Consumer spending has been down since then in what economists refer to as a “soft patch”.
Like the economy, the job market seems to be recovering as well. In April, the number of new jobs in the U.S. climbed to 274,000, compared to 146,000 in March. New claims for unemployment insurance increased last week by only 1,000 according to the Labor Department. The employment report for May will be released next week. Economists are expecting about a 175,000 increase in new jobs. According to AP,
President Bush wants the job market, the overall economy and certainly the financial markets to be on sound footing as he sells his overhaul of Social Security, which would allow workers to set up personal investment accounts in stocks and bonds.
Federal Reserve policy-makers, who believed the economic slowdown in March was probably “transitory,” have expressed more concern about the prospects of rising inflation.
In the report, inflation was unrevised from what it was estimated to be. The personal consumption expenditure index went up 2.1%, and the core personal consumption expenditure price index went up 2.2%.
The Federal Reserve has increased short-term interest rates eight times since last June in an effort to stop inflation from becoming a problem. The Fed is expected to raise them again at its next meeting, which is at the end of June.
Chris is a staff writer for Murdok. Visit Murdok for the latest ebusiness news.
