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GDP surges 5.6 percent
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April 30, 1997: 9:21 a.m. ET
Rising to highest level in 10 years, economy passes Wall Street estimates
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NEW YORK (CNNfn) - Gross domestic product in the United States surged ahead 5.6 percent in the first three months of 1997, the U.S. Commerce Department said Wednesday. The increase far exceeded Wall Street's estimates.
The 5.6 percent annual rate rise was the strongest since 1987. The jump was on top of the 3.8 percent gains the economy saw in the last three months of 1996.
The GDP measures the value of all goods and services produced within the country. It is a key economic indicator for the Federal Reserve Board as it looks for signs of inflation. The Fed may raise interest rates at its May meeting if it feels that the economy is heating up too quickly.
Analysts had estimated that the GDP would rise 4 percent. The Commerce Department said the jump would have been even greater except for a pickup in imports and a slowing in exports of American-made products to foreign markets.
The report comes one day after economic figures showed that employee wages and benefits grew slowly in the first three months.
Jerome Lacey, bond futures trader for Prudential, said that investors would not overreact. "A lot of the bear case is tied to wage pressures in yesterday's data," he said.
Lacey also noted that other major figures will be released this week, including the National Association of Purchasing Management index and April's employment report.
Two inflation indicators within the GDP report suggest rises in prices. The implicit price deflator, which Federal Reserve Chairman Alan Greenspan watches closely, advanced at a 2.3 percent annual rate after a 1.5 percent rise in the fourth quarter last year. The fixed-weight measure of price changes advanced at a 2.7 percent pace.
Consumer spending, which is a strong force in the economy, pushed forward at a powerful 6.4 percent or $73.5 billion annual rate in the first quarter.
The Department also said that businesses are counting on the trend to continue. Inventories grew at a $46 billion rate in the first quarter, compared to $17 billion in the fourth quarter of last year.
Corporations are making long term plans for growth. The report said they increased their investments to expand operations. Spending on durable equipment shot up at an $18.2 billion annual rate, or 12.9 percent, after falling $1.3 billion in the fourth quarter last year.
The Department of Commerce will revise the GDP twice over the coming months to arrive at an official figure.
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