U.S. economic growth was stronger than the government previously estimated in the first quarter, although it fell somewhat short of Wall Street's best guess. The moderate upward revision should be more fuel for inflation-wary stock investors.
According to the Commerce Department, gross domestic product grew at a 3.5% rate in the first quarter, up from an advance estimate of 3.1%. The upward revision was a virtual certainty after the government reported an unexpected narrowing in the U.S. trade deficit in March.
Economists had been forecasting that Thursday's revision would show 3.6% growth. GDP growth was 3.8% in the fourth quarter of 2004.
A closely followed inflation measure in the GDP report, the implicit price deflator, came in at 3.2%, about one tenth of a percent below forecasts. Another price gauge, the personal consumption expenditures price index, held steady at 2.1%.
Thursday's report showed that consumer spending rose 3.6% in the first quarter compared with 4.2% in the fourth quarter. The new number is up from the Commerce Department's advance estimate of 3.5%. Some of the downside to estimates appeared related to spending on equipment and software, which rose 5.6% in the updated report, down from 6.9% in the April estimate.
Stock futures foretold a higher open both before and after the report was released. The
was recently trading about 5 points above fair value, while the Nasdaq 100 was set for a 10-point jump. Treasury yields also held steady at about 4.07%.