U.S. Growth Revised Up To 2.5%

March 29, 2007
Keeps full year growth at 3.3%

The U.S. economy expanded at a 2.5% annualized pace in the fourth quarter of 2006, a bit faster than earlier estimates, revised data showed March 29. The Commerce Department revision for gross domestic product (GDP) was up from a 2.2% estimate released a month earlier.

Much of the upward revision came from a higher level of inventories, which could mean lower output in the current quarter, a bit more business investment and lower imports. The latest data meant growth for the full year 2006 was 3.3%, unchanged the estimate last month.

Robert Brusca at FAO Economics said the revision gives little reason to cheer. "GDP is stronger on stronger inventory growth and weaker imports," he said. "Weaker imports tell us that the economy is even weaker than we though since imports are a part of demand that is served from overseas ... it's a signal that economics condition are weaker here."

A key inflation index linked to GDP was revised to show a decline of 1% in the fourth quarter, revised from an earlier estimate of a 0.9% drop. Core prices, which exclude food and energy, increased 1.8%, revised down from 1.9%. Over the year, the price index was up 2.7% and core prices rose 2.2%.

Federal Reserve chairman Ben Bernanke on March 28 repeated his view that the economy will remain on a "moderate" growth path despite weakness in the housing sector. He also said inflation pressures are elevated but likely to ease. But Bernanke said the outlook for both growth and inflation remains subject to uncertainties, particularly in the housing market. Residential investment plunged 19.8% in the fourth quarter, revised from the earlier estimate of a 19.1% drop.

Copyright Agence France-Presse, 2007

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