The US economy expanded at a faster rate than had been expected in the first three months of the year, according to revised government figures just released.
The reason was strong exports and significantly more new homes being built. The data seems to indicate that high oil prices have yet to affect the US’s capacity to grow. The Commerce Department in Washington now says that gross domestic product in the world’s largest economy rose at an annual rate of 3.8% between January and March. The initial estimate had been 3.1%. The government’s official estimate of future growth will not be available for another month, but the majority of economists believe it will be around 3.5%. The revised GDP report also showed that inflation is not a problem. Personal consumption expenditures – minus the more volatile food and energy prices – rose at an annual rate of just 2%. Federal Reserve Chairman Alan Greenspan watches that figure closely to make sure the US economy can withstand further interest rate rises. Most economists are convinced the Fed will again increase the cost of borrowing this week, by 0.25% from its current 3%. The euro zone interest rate remains at 2% because of the region’s sluggish economic growth. However, the US economy has several potential problems, as well as higher oil prices, there are huge deficits – in trade, government budget and current account – as well as a potential housing bubble and growing consumer debt.