STRONGER overseas sales and brisk production for inventories pushed the American economy ahead at its fastest rate in more than nine years during the first quarter.
The Commerce Department revised upward its estimate of growth in gross domestic product to a 5.8 per cent annual rate in the three months from January through March from the already strong 5.6 per cent rate it published a month ago.
It was the strongest quarterly expansion since a 6 per cent rate registered in the fourth quarter of 1987 and was well ahead of the 3.8 per cent rate of GDP increase posted in last year's closing quarter. The revised figure for first quarter GDP growth was slightly below Wall Street economists' forecasts that it would advance at a 6 per cent rate.
However, most analysts said they were not surprised by the figures. Many think the economy peaked in the first quarter and is headed for more subdued growth in the rest of the year.
"The upward revision to real GDP in the first quarter reflects upward revisions to inventory investment and to exports that more than offset downward revisions to consumer spending," the Commerce Department said.
A final estimate of GDP's first quarter performance will be issued a month from now. The revised report also included the first look at corporate profits during the opening months of 1997.
Most analysts predict the pace of expansion in national output will slow to a rate around 2.5 per cent a year during the current second quarter. It was unclear, however, whether the anticipated slowdown would be enough to persuade Federal Reserve policy makers to once again hold off on interest rate rises in July, as it did in May.
The Commerce Department said its revised estimates showed that businesses boosted their inventories at the fastest rate in two years during the first quarter, up $51.4 billion instead of the $46.1 billion estimated a month ago.
That was the strongest pace of restocking since the first quarter of 1995, when inventories were being added to at a $53.7 billion annual rate. While inventory building bolsters the economy in the period in which it occurs, it generally foreshadows slower GDP growth ahead. Trade also stimulated the economy more than initially thought, as exports increased at a $23.1 billion rate in the first quarter instead of the $17 billion rate Commerce reported last month.
Inflation remained relatively muted, according to two measures of price rises in the GDP report, though not as tame as during last year's closing quarter. The implicit price deflator advanced at a 2.2 per cent annual rate in the first quarter instead of the 2.3 percent estimated last month. But that was up from a 1.5 per cent fourthquarter increase last year.
