May 31, 1997 in Nation/World

Economic Growth Best In Decade Gdp Hasn’t Been Higher Since 1987, But Experts Say It’s Too Good To Last

Associated Press
 

The nation’s economic growth surged at a 5.8 percent annual rate during the first three months of this year, the best in a decade and even better than the government’s first estimate.

The seasonally adjusted annual growth rate in the gross domestic product - the sum of all goods and services produced in the United States - hasn’t been higher since the fourth quarter of 1987.

Friday’s report by the Commerce Department marks a slight improvement over last month’s 5.6 percent estimate. U.S. companies sold more exports than originally thought and businesses built their inventories at a faster rate than first calculated.

Those two changes more than offset a downward revision in consumer spending from a 6.4 percent rate to a still strong 5.7 percent.

The extraordinary growth in the first quarter pushed up after-tax corporate profits by 4.5 percent to a seasonally adjusted annual rate of $426.5 billion, an all-time high. It was the largest gain in a year.

That in turn has produced a bull market on Wall Street with major stock indexes rising to new records this week.

However, the surprising growth surge in the first quarter is too good to last and analysts have found the seeds of future moderation in the quarter’s big inventory buildup. Because shelves and backlots are full, factories probably aren’t planning more than modest production increases.

Economists expect growth during the rest of this year to average a modest 2 percent. That’s good news from the standpoint of those worried galloping growth will spur inflation.

But an inflation gauge tied to the GDP rose at a 2.8 percent rate, the worst in two years.

© Copyright 1997 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


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