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Friday, 26 April, 2002, 17:19 GMT 18:19 UK
US economic growth soars
US economic growth soared to an annual rate of 5.8% during the first three months of 2002, the US Commerce Department has reported.

As encouraging as this number is, I am not content. We've got more to do

US President George Bush
But consumer optimism was dented in April by a weak stock market and Middle East tensions, the University of Michigan's closely watched snapshot of consumer sentiment revealed.

The sharp rise in gross domestic product (GDP) fuelled hopes that the US recession which began in March last year has now come to an end.

"This number shows that we clearly have started a recovery," said AG Edwards & Sons chief economist Gary Thayer.

Cautious optimism

But although the bust might be over, there are no guarantees of a boom ahead, some analysts warned.

"The economy is probably not as strong as the headline number is suggesting," Mr Thayer cautioned.

The quarterly growth figure was the strongest since the final three months of 1999.

It followed a 1.7% expansion during the October to December period, and a 1.3% contraction in the three months to September.

But much of the strength in the US economy depends on consumers' willingness to spend.

And the weaker University of Michigan index suggests that the consumer spending spree may run out of steam.

The index for April fell to 93.0 from 95.7 in March, a steeper than expected decline.

"As encouraging as the (economic growth figure) is, I am not content. We've got more to do," said US President George Bush.

Stock rundown

Analysts added that much of the GDP growth was fuelled by an increase in defence spending since US forces began military action in Afghanistan.

"It is stronger than we expected. Part of that is due to the increase in defence spending," said Wachovia senior economist Mark Vitner.

Economic activity received a further boost from a jump in new orders as firms finally exhausted stockpiled goods and raw materials.

Shares fall

Growth is expected to decline during the April to June period.

"In the second half of the year we are going to see somewhat slower growth," said Northern Trust chief economist Paul Kasriel.

The mixed economic outlook contributed to a decline in the Dow Jones index of leading shares, which on Friday closed below the key 10,000 level for the first time in two months.

Christopher Lowe, First Tennessee Securities
"We're not going to see 6% growth going forward, but its a terrific start to the economic recovery."
See also:

25 Apr 02 | Business
World growth set for recovery
26 Apr 02 | Business
Japan unemployment falls
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