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Final 1Q GDP growth soars
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June 25, 1998: 9:33 a.m. ET
Output rose at fastest annual rate in 2 years, pushing inventories to record
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NEW YORK (CNNfn) - U.S. output rocketed in the first quarter at its fastest rate in two years, but the bond market reacted coolly as inventories piled up, hinting a second-quarter slowdown may be on the way.
The final figure for gross domestic product growth in the first quarter came in at 5.4 percent on an annualized basis, the Commerce Department said Thursday.
That was up from last month's revised estimate of 4.8 percent and marked the fastest rate of gain in the GDP since a 6.0 percent rate in the second quarter of 1996.
The bond market gave up slightly on early-morning gains following the report, with the 30-year Treasury down 1/32 in price for a yield of 5.65 percent. A rise in first-time jobless claims may have helped keep bond yields down.
The implicit price deflator, a key gauge of inflation, rose 1.1 percent compared with a 1.0 percent gain estimated in May.
Inventories jumped 18 percent, the biggest gain on record, to $105.7 billion. Non-farm inventories rang in at a record $96.7 billion.
One analyst said that means producers likely will cut output to trim excess stockpiles in the next quarter.
"A lot of that was borrowed by the second quarter in the first quarter," said Gail Fosler, an economist at the Conference Board. "I think it is indicative of weakness in the second quarter."
But, she added, "I think we are setting the stage for an acceleration in the second half of the year."
The Federal Reserve isn't likely to bump up interest rates to ease the hot economy, Fosler said, at least "not until we see some resolution of the Asian crisis."
"We are the engines of growth, and we can't afford to see those engines slow down," Fosler added. 
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