The U.S. economy may have grown at a 5 percent annual pace from January through March as companies spent more on equipment and added inventories to meet stronger consumer demand, a survey of economists showed in advance of today's Commerce Department report. The expected rise in gross domestic product, the value of all goods and services produced, would follow a 4.1 percent annual rate in the fourth quarter and 8.2 percent in the third. The forecast is based on the median of 74 estimates in a Bloomberg survey. The average growth rate in the second half last year was the strongest since the first six months of 1984.
Tax cuts and the lowest interest rates in four decades helped boost retail sales in March by the most in a year, while more orders for durable goods suggest businesses are gaining confidence that may lead to increased hiring. International Business Machines Corp. and Burlington Northern Santa Fe Corp. are among companies reporting greater demand. ``All parts of the economy are contributing to strong growth,'' said Douglas Lee, president of Economics from Washington, a consulting firm in Potomac, Maryland. The Labor Department may report the number of Americans filing initial claims for jobless benefits fell by 10,000 to 343,000 last week, the fourth decline in five weeks, according to a survey of economists. The department may also say that its employment cost index for the first quarter climbed 0.9 percent, reflecting increases in health-insurance costs, according to economists' forecasts. All the government economic reports are scheduled for release at 8:30 a.m. in Washington.
Consumer Spending
Consumer spending, which accounts for more than two-thirds of the economy, may have grown 4.2 percent in the first quarter after a 3.2 percent gain in the fourth quarter, according to the median estimate of economists. That would follow a 6.9 percent jump in the previous three months, which was the largest since 1986. Companies are trying to rebuild stockpiles drained in last year's second half. Inventories jumped 0.7 percent in February, the biggest increase in more than three years, following a 0.2 percent rise in January, the Commerce Department said earlier this month. Relative to sales, stockpiles held at the leanest ever in February, suggesting increased production to keep up with demand. The gain in inventories is expected to add 0.9 percentage point to growth in the first quarter, according to a forecast from economists at Lehman Brothers Inc. in New York. Additions to stockpiles added 0.71 percentage point to economic growth in the fourth quarter.
IBM Chief Executive Sam Palmisano said he expects worldwide demand for computers, software and related services to continue to pick up this year. IBM is based in Armonk, New York. ``We are enthusiastic about our prospects for 2004 and beyond,'' Palmisano told shareholders Tuesday at the company's yearly meeting in Providence, Rhode Island. Economies are steadily improving in many nations, including the U.S., he said. ``We intend to capitalize fully on the rebound.''
Equipment
Business spending on equipment and software may rise at a 10 percent pace, according to Bill Sharp, an economist at J.P. Morgan Securities in New York. That would mark the third straight double-digit increase in such spending, which last occurred in 1999. Durable-goods orders rose for a second straight month in March as companies booked more machinery, metals and electronics. The rise makes it more likely companies will boost work hours or hiring, Lehman Brothers economist Drew Matus said last week. The economy created 308,000 jobs in March, the most in four years. Companies expect to increase hiring this year as an improving economy boosts sales, a survey of purchasing and supply executives from the Institute for Supply Management showed this week. Fort Worth, Texas-based Burlington Northern, the second- biggest U.S. railroad by sales, said first-quarter revenue rose 12 percent as the improving economy helped it post the industry's biggest increase in shipments. First-quarter profit also climbed. The profit increase from January through March ``is all about revenue,'' Burlington Northern Chief Executive Matthew Rose said in an interview. ``It was a broad-based breakout of the economy,'' Burlington Northern also increased rates 2 percent in the latest quarter, Rose said.
Rising demand, a recovering labor market and interest rates at a 45-year lows have yet to lead to ``broad-based'' inflation pressures, Federal Reserve Chairman Alan Greenspan said in congressional testimony last week. A measure of inflation tied to GDP probably rose at a 2 percent annual pace, compared with a 1.5 percent rise in the fourth quarter, according to the median estimate of economists surveyed. ///www.bloomberg.com