Updated from 10:48 a.m. EST
U.S. economic growth raced ahead in the fourth quarter at its fastest pace in more than 15 years, according to newly revised data reported by the
The nation's gross domestic product grew an extraordinary 7.3% during the quarter, leapfrogging the government's earlier estimate of 6.9% growth. It was the fastest growth pace since the first quarter of 1984, when the economy grew at 9%. Thursday's report was the government's final revision for fourth-quarter GDP.
The magnitude of the revision surprised Wall Street economists, who had been expecting 7% growth, according to a poll by
. The revision also raised total GDP growth for 1999 to 4.2%, slightly below the total 1998 growth of 4.3%.
Economists said most of the fundamentals behind the strong growth -- strong consumer and business spending, robust manufacturing activity, and heavy construction activity -- were largely unchanged in the latest GDP report. But a clearer reading on U.S. international trade data tipped the scales toward higher growth.
"The stronger growth was largely due to a smaller drag from international trade than previously thought," said Paul Kasriel, chief economist at
. Revisions to fourth-quarter trade data have shown that the U.S. exported more goods, and imported less goods than early estimates had shown.
In contrast to the sharp upward revision in growth, however, the report's measure of consumer prices was not revised upward from its initial reading of 2.5%. The inflation component, known as that chain-weighted price index, has recently gained favor with
officials, and has replaced the consumer price index measure in the Fed's semiannual "Humphrey Hawkins" reports to Congress.
The price index remained unrevised in the face of stronger growth largely because of the fast-growing ability of U.S. workers to produce more goods and services in less time. That growth in productivity allowed businesses to fill higher demand without charging more for goods. The Labor Department recently reported that productivity grew at a 6.4% pace in the fourth quarter.
The strong growth adds fuel to arguments that the economy rolled out of 1999 with thunderous momentum. But most economists, already convinced of the nation's fourth-quarter sprint, are interested to see whether that momentum continued into the first quarter of 2000.
A separate report Thursday from the Labor Department showed that the number of Americans filing for unemployment insurance benefits rose by 3,000, but remained near a 26-year low at 266,000 in the week ended March 24.
The jobless claims number points to the extremely tight U.S. labor market, a beneficiary of the overall strong U.S. economy. But economists warn that a shrinking labor pool could quickly drive salaries and wages higher, a scenario that could cause more dollars to chase the amount of goods, which would lead to inflation.
Many factors that led to such strong fourth-quarter growth appear to still be in place, such as consumer, business and construction spending. But Kasriel said that the country is likely to see a first-quarter slowdown in government spending, and that the strike by engineers at Boeing in the first quarter could also drag on GDP because it will result in fewer exports of airplanes, which often account for a large portion of the dollar value of U.S. exports.
Still, the momentum of the economy has most Fed watchers predicting the Fed will continue to raise interest rates in an attempt to slow the economy and prevent inflation. Higher interest rates usually curb growth by making it harder for businesses and consumers to borrow and spend.
But thus far, several interest rate increases have had little effect on the economy. The Fed has raised rates five times for a total of 1.25 percentage points in the last 10 months, and many economists feel that it will continue raising rates as long as economic activity remains strong.