US growth highest for nine years

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The Independent Online
The US economy grew at an astonishing 5.6 per cent in the first quarter of this year, fuelled notably by a near-doubling in the rate of spending growth by consumers and a surge in business inventory build-up.

The figures far exceeded expectations on Wall Street - something near 4 per cent had been forecast - and represented the highest rate of economic expansion in the US for more than nine years. It also showed a strong acceleration since the last quarter of last year when growth hit 3.8 per cent.

"Job growth is good. Real income is rising. Sentiment is high. Unemployment is the lowest in years. Times are good for American consumers," commented Allen Sinai, economist at Primark Decision Economics.

The data is bound to rekindle fears of overheating of the economy and a return of inflation. It will also strengthen the camp that believes another interest rate rise is inevitable. But after retreating mildly in the wake of the report's release, both bond prices and equities began once more to pick up in New York yesterday.

By midday, the Dow Jones industrial average was up by around 70 points, building on the remarkable 179-point gain achieved on Tuesday.

Investors may be troubled, however, by hints of inflationary dangers in yesterday's GDP growth report. The key price measure showed an advance of 2.7 per cent for the quarter, the strongest rise seen since the first quarter of 1995.