Economy Growth Boils, but May Be Cooling

The Associated Press
Thursday, June 29, 2006; 2:07 PM

WASHINGTON -- The economy grew at its hottest pace in 2 1/2 years in the opening quarter of 2006 but signs suggest it has cooled since then.

The Commerce Department reported Thursday that economic activity expanded at a 5.6 percent annual rate in the January-to-March period. The revised reading on gross domestic product was an even stronger showing than the 5.3 percent pace estimated for the quarter a month ago.

The new estimate _ based on more complete information _ matched economists' forecasts.

The stronger GDP figure mostly reflected an improvement in the country's trade deficit, which was much less of a drag than previously estimated.

Gross domestic product measures the value of all goods and services produced within the United States and is considered the best barometer of the country's economic fitness.

Fresher barometers, however, suggest the economy is slowing.

In a separate report, the Labor Department said new claims filed for unemployment benefits last week rose by 4,000 to 313,000 _ a bit more than economists were expecting.

Analysts believe economic growth in the April-to-June quarter could turn out to be half the pace of the first quarter's. They are predicting growth in the range of 2.5 percent to 3 percent. High energy prices and a more moderate housing market will play roles in the expected slowdown.

"I think the economy is moving from a boil to a simmer," said Richard Yamarone, economist at Argus Research.

If that turns out to be the case, the economy will have registered a seesaw-like pattern of growth in the last few quarters.

The opening quarter's energetic performance followed a lethargic showing in the closing quarter of 2005 when the economy grew by a feeble 1.7 percent pace. Fallout from the Gulf Coast hurricanes, including high energy prices, prompted belt tightening by people and businesses.

Consumers and businesses came roaring back in the first quarter, though, a main reason why the overall economy performed so well.

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