Last month, it was estimated that the United States economy would grow at a rate of 3.1% in the first quarter of 2005. Today, the Commerce Department released a report that blew past that estimate.
The reports said that the U.S. economy was growing at an annual rate of 3.5%. The better-than-expected rate is largely due to fewer imports than previously estimated.
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”.
“Energy prices may have contributed to caution in business spending, but consumer spending is still quite strong and real estate is through the roof,” said Action Economics chief economist Mike Englund. “The economy isn’t showing much sign of weakening, and with hindsight this looks like a period of strong and steady growth.”
The economy seems to be on the rebound as does the job market. Last month, the number of new jobs in the U.S. jumped to 274,000, compared to 146,000 in March. New claims for unemployment insurance went up last week by only 1,000 according to the Labor Department. Next week, the government will release the employment report for May. Economists expect about a 175,000 increase in new jobs. AP reports:
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.
