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Skriven 2006-05-25 19:51:00 av Jeff Binkley (1:226/600)
Ärende: Economy
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http://biz.yahoo.com/ap/060525/economy.html?.v=15

AP
Economy Jumps 5.3 Percent in 1st Quarter
Thursday May 25, 4:57 pm ET 

By Jeannine Aversa, AP Economics Writer  
Economy Climbs 5.3 Percent in First Quarter; High Energy Prices 
Overshadow Gains 


WASHINGTON (AP) -- The economy showed even more pep than initially 
thought in the first quarter, zipping ahead at a 5.3 percent pace. But a 
less energetic housing market and high energy prices are now taking out 
some of the oomph.
 
"I think we sort of had the last hurrah for the economy for a while," 
said Nariman Behravesh, chief economist at Global Insight. "We aren't 
going to see this kind of growth for a bit. We will see softening in the 
economy, but there's no reason to be pessimistic."

The figure released by the Commerce Department Thursday showed gross 
domestic product during the January-to-March quarter surpassing the 4.8 
percent annual rate estimated a month ago. It marked the strongest 
growth spurt in 2 1/2 years. The upgrade mostly reflected stronger U.S. 
exports and better inventory building by businesses.

GDP, which measures the value of all goods and services produced within 
the United States, totaled $11.39 trillion in the first quarter when 
annualized and adjusted for inflation.

On Wall Street, stocks rallied. The Dow Jones industrials gained 93.73 
points to close at 11,211.05.

President Bush, coping with his lowest job-approval ratings, said the 
GDP report provides evidence that "America's economy is on the fast 
track."

Some more forward-looking barometers, though, suggest economic growth 
may be moderating.

The housing market, once a star economic performer, is losing some of 
its shine as mortgage rates march higher. Sales of previously owned 
homes fell 2 percent in April to a pace of 6.76 million units, the 
National Association of Realtors said in another report.

House prices posted the smallest increase in 4 1/2 years. And, the total 
number of unsold homes climbed to a record high of 3.38 million units.

"An orderly retrenchment of the market is what all of us have been 
hoping for and that is what we are getting. At least for now," said Joel 
Naroff of Naroff Economic Advisors, who was concerned by the backlog in 
unsold homes.

Economists predict economic growth in the April-to-June quarter probably 
slowed to a pace of around 3 percent to 3.5 percent, which would still 
be decent. The performance of the housing market and energy prices will 
play key roles in shaping the ultimate outcome.

The Federal Reserve is keeping close tabs on the extent to which a less 
energetic housing market and high energy prices put a drag on economic 
activity. The Fed also is monitoring whether high energy prices feed 
into the costs of other goods and services and spread inflation 
throughout the economy.

An inflation gauge showed "core" prices -- excluding food and energy -- 
rose in the first quarter by 2 percent, considered the upper bound of 
the Fed's inflation comfort zone.

The reading was taken before oil prices shot up to a record high of 
$75.17 a barrel in late April. Oil prices are now hovering above $71 a 
barrel.

To fend off inflation, the Fed on May 10 boosted interest rates for the 
16th time in two years. Some economists believe another rate increase is 
in store when the Fed meets next, June 28-29. Others, however, think the 
Fed will take a pause in its rate-raising campaign.

Even though the new GDP figure fell short of the 5.8 percent pace 
economists were forecasting, it still made clear that the economy had 
snapped out of its end-of-year lull.

In the final quarter of 2005, the economy grew at a feeble 1.7 percent 
pace. Fallout from the Gulf Coast hurricanes, including high energy 
prices, prompted people and companies to tighten their belts.

Consumers and businesses regained their appetite for spending and 
investing in the first quarter, a major factor underpinning the brisk 
pace of growth logged by the economy.

Their appetite, though, was a tad less hearty than initially estimated.

Consumers boosted spending at a 5.2 percent pace, slightly less than the 
5.5 percent pace first estimated.

Business spending on equipment and software, meanwhile, zoomed ahead at 
a 13.8 percent pace. That wasn't as robust as the 16.4 percent growth 
rate initially calculated.

Companies continued to fatten their profits.

One measure of after-tax profits in the GDP report showed profits 
increased by 8.8 percent in the first quarter, following a 13.8 percent 
rise in the prior period.

Separately, the Labor Department said new filings for jobless benefits 
plunged by 40,000 to 329,000 last week as the end of a partial 
government shutdown in Puerto Rico took people off the unemployment 
rolls.

Of the 5.3 percent GDP growth, Stuart Hoffman, chief economist at PNC 
Financial Services Group quipped: "Enjoy this one while you can." For 
the remainder of the year, growth will be around 3 percent, he 
predicted.



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