WASHINGTON – The U.S. economy shot forward at an upwardly revised 5.3 percent annual rate in the first quarter, the fastest growth in 2-1/2 years, as companies built up inventories and exports strengthened, a Commerce Department report Thursday showed.
First-quarter growth in gross domestic product was more than triple the 1.7 percent annual rate recorded in last year's fourth quarter, though still slightly below Wall Street economists' forecasts for a 5.7 percent pace.
Prices remained in check, with the core personal consumption expenditures price index that the Federal Reserve favors rising at a 2 percent rate compared with 2.4 percent in the fourth quarter.
The first-quarter surge in GDP - the largest since a 7.2 percent jump in the third quarter of 2003 - was partly fueled by rebuilding in the hurricane-battered Gulf Coast region. Growth is widely forecast to level off in coming quarters to a range of between 3 percent and 4 percent.
A sharper buildup in inventories than previously thought during the first three months of 2006 accounted for much of the upward revision in growth.
Companies built up inventories at a $32.3-billion annual rate instead of the $21.9 billion rate reported last month, moderately less than the $37.9-billion rate posted in the fourth quarter.
In addition, exports were stronger than originally reported, rising at a 14.7 percent annual rate rather than 12.1 percent.
This was the second reading of economic growth for the first three months of the year. The government revises the data twice after each initial estimate and its final tally of first-quarter performance will not be available for another month.
Somewhat surprisingly, spending on housing was moderately stronger than had been initially thought, growing at a revised 3.1 percent rate instead of 2.6 percent estimated a month ago. Fed Chairman Ben Bernanke told Congress last month that one of the reasons economic growth was likely to moderate in coming months was that housing markets were showing signs of softening.
The GDP report pointed to another reason for anticipating slower future growth, noting that wages and salaries were under pressure.
It said the advance in real disposable personal income slowed to an estimated 2.1 percent pace in the first quarter from 5.1 percent in the fourth quarter. Both estimates were revised down from a previously reported 6.7 percent and 3.2 percent respectively.
Personal consumption spending, which fuels two-thirds of national economic activity, grew at a 5.2 percent annual rate in the first quarter, down from the 5.5 percent reported a month ago. The pace was still far ahead of the slim 0.9 percent fourth-quarter growth and was the fastest clip in 2-1/2 years. Consumer spending was one of the primary reasons overall GDP performance accelerated to such a brisk pace in the period.