OK, so the economy didn't grow quite as fast in the first quarter as some had hoped. Still, few on Wall Street are complaining, as Uncle Sam's preliminary estimate of first-quarter economic growth turned out to be good enough.
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In a report released this morning, the Bureau of Economic Analysis took its first crack at measuring economic growth in the first three months of 2006. It found that gross domestic product–the broadest measure of economic activity–expanded at an annual rate of 4.8 percent in the first quarter.
While this was a tad shy of forecasts of 5 percent or higher, it was tremendous by historical standards, where anything over 3 percent is considered good. In fact, the economy grew faster in the first quarter than at any other time since the third quarter of 2003, when GDP jumped 7.2 percent.
The first quarter also marked a nice turnaround from the fourth quarter of 2005, when the economy expanded only 1.7 percent in the wake of the economic devastation caused by Hurricane Katrina.
Of course, the post-storm rebuilding efforts in the Gulf Coast have contributed to economic growth this year. For example, government spending rose 10.8 percent in the first quarter, after falling 2.6 percent in the fourth quarter of 2005, according to this morning's report.
But it wasn't just the federal government. Corporate spending grew by 14.3 percent, while consumer expenditures increased 5.5 percent.
Perhaps the best news of all was that this growth did not produce additional inflationary pressures, according to the federal government.
For instance, inflation, as measured by personal consumption expenditures, rose 2 percent in the first quarter, down from 2.4 percent in the fourth quarter of last year. Core inflation, which strips out volatile food and energy costs, fell even more. Late last year, core personal consumption expenditures were climbing at an annual rate of 2.6 percent. At the start of this year, that fell to 1.7 percent.
What's more, this growth appears to be somewhat sustainable. Said Citigroup economist Steven Wieting: "Today's data leave us expecting GDP growth of about 3.25 percent in the second quarter and about 3 percent over the remainder of the year in light of first-quarter strength and the latest rise in energy costs."
