The government revised its estimate of U.S. economic growth in the fourth quarter of 2005. Uncle Sam now believes the economy grew at an annual rate of 1.7 percent, not 1.6 percent as was previously thought.
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Despite the seemingly good news, this morning's announcement was actually viewed as worrisome—not welcome—on Wall Street.
For starters, Wall Street no longer cares much about how fast gross domestic product expanded late last year. Its attention is squarely focused on the first quarter of 2006, when many believe the economy rebounded.
A recent survey of economic forecasters by the Federal Reserve Bank of Philadelphia shows the consensus view on Wall Street is that GDP grew 4.4 percent in the first quarter (which ends this week).
But many economists believe that the economy may actually have grown much faster, perhaps increasing by more than 5 or 6 percent.
What concerns investors is that in addition to revising upward its estimate for fourth-quarter GDP growth, the government also upped its measure of inflation, a natural byproduct of economic expansion.
According to the Bureau of Economic Analysis, core inflation—based on personal consumption expenditures minus volatile energy and food costs—rose 2.4 percent over the past year. That was revised higher from earlier estimates of 2.1 percent.
While this isn't a huge jump in prices, it does give the hawks some ammunition in their calls for the Federal Reserve Board to keep hiking interest rates in an effort to combat inflation.
