Economy Expanded at 5.8% Rate in First Quarter

The U.S. economy grew at the fastest rate in more than two years during the first quarter of 2002, the Commerce Department said Friday.

Trucking is extremely sensitive to economic conditions and signs of growth are good news for the industry.

Gross domestic product, which is the total value of all goods and services produced in the nation, rose at a 5.8% annual rate. That was faster than expected and the biggest increase since the last three months of 1999, Bloomberg said.

Analysts told Bloomberg that although it is unlikely the coming quarters will be quite as strong as the period ended March 31, it does appear the economy will continue to grow. The economy grew at a 1.7% pace in the fourth quarter of 2001.

After hearing about the report, President Bush said the tax cuts he signed into law helped spur economic activity, and Congress should make them permanent, Bloomberg reported. He also said he was encouraged by the results, but more work must be done to ensure the recovery lasts.

The combined increase in consumer spending and the continued reduction in inventories accounted for all but 0.2 percentage points of first-quarter growth, Commerce said.

Businesses reduced stockpiles at a $36.2 billion annual pace in the first quarter after cutting a record $119.3 billion from October to December. Economists said the swing in inventory levels in coming quarters will be less and won't provide much of a boost to GDP, Bloomberg noted.

Consumer spending grew at a 3.5% annual pace, compared with a 6.1% pace in the fourth quarter. Commerce's report also found that government spending increased at a 7.9% annual pace, while spending on national defense rose at a 19.6% rate, the fastest since the first quarter of 1967.

Friday's report confirmed for economists that the recession begun last March has ended and may be the mildest on record, Reuters said. Still, it may take months before the official end is declared because the cycle-dating committee of the National Bureau of Economic Research often waits months to make its decision, Bloomberg said.

The exact pace of the rebound in the latter half of the year likely will be determined by how quickly businesses reinvest in new factories, equipment and software, after cutting spending every quarter last year, analysts said.

The GDP price deflator, a gauge of inflation, rose at a 0.8% annual rate in the first quarter, less than the 2.2% increase for all of last year. Adjusted for inflation, GDP totaled $9.48 trillion in the first quarter when measured at an annual rate. In the fourth quarter, GDP totaled $9.35 trillion.

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