Newspaper article THE JOURNAL RECORD

Economy Posts Healthy Growth at Start of Year

Newspaper article THE JOURNAL RECORD

Economy Posts Healthy Growth at Start of Year

Article excerpt

WASHINGTON -- Torrid consumer spending helped the nation's economy grow at a brisk annual rate of 4.3 percent at the beginning of the year. Economists believe growth has slowed in the current quarter but probably not enough to dissuade the Federal Reserve from raising interest rates as a precaution against inflation.

The 4.3 percent increase from January through March in the gross domestic product -- the nation's output of goods and services -- was slightly better than the 4.1 percent rate estimated a month ago, the Commerce Department said Friday.

The improvement reflected a slight revision in the trade deficit, which, while still at a record high, was $6.5 billion lower than the government earlier estimated. The economy's robust first quarter pace was far above expectations. That has raised concerns that the Federal Reserve will push up short-term interest rates at its meeting next week to keep the expansion from triggering inflation. Even though many analysts believe that growth has slowed in the April-June quarter to around 3.5 percent, they feel the drop has not been sufficient to keep the central bank from raising interest rates next week. Some analysts said solid second quarter growth could spur the Fed to enact another rate increase at its August meeting. "My hunch is that they would raise the interest rates again on Aug. 24," said First Union economist David Orr, who estimates second- quarter growth to slow only to 4 percent to reflect a slowdown in consumer spending. "The benefit of refinancing is running out. The benefit of lower gasoline is running out, and higher tax refunds are going away," Orr said, explaining his second quarter assessment. "The superchargers for consumer spending have faded a bit." Economist Mark Zandi of Regional Financial Associates also expects a pullback in consumer spending to lower the second-quarter growth rate. …

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