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Friday, April 30, 1999 Published at 16:42 GMT 17:42 UK

Business: The Economy

US economy storms ahead

The United States - a picture of economic activity

The United States economy continues to boom, growing 4.5% during the first quarter of 1999 - well ahead of the expectations of Wall Street economists.

Analysts had forecast a 3.3% increase, following the 6% rise in the last quarter of 1998.

Export drag

According to data from the Commerce Department, the solid growth of Gross Domestic Product, a country's total output of goods and services, came despite the fact that the US trade deficit had soared to a record level during the first three months of this year.

[ image: Domestic demand is driving the US economy]
Domestic demand is driving the US economy
The figures are proof that most US companies have emerged relatively unscathed from the economic crisis in Asia, Russia and Latin America.

Nonetheless, the weakened demand for US products amounted to a loss of $55.6bn.

Without this drag from external trade, the economy would have grown an even more remarkable 6.9% in the first quarter.

Consumer boost

But strong consumer spending continues to be the main driving force of the US economy.

"The US economy's extraordinary performance continues and shows no sign of letting up," said John Lonski, chief economist at Moody's investment services.

He suggested that "perhaps the American consumer deserves the Nobel Prize in economics." No inflation

The most amazing thing about the US data, though, is the fact that the boom is hardly driving up prices and wages - unusual for an economy that strong.

Kathryn Kobe, senior economist at Joel Popkin and Co, said the lack of inflationary pressure would persuade the US Federal Reserve not to raise interest rates now.

But she warned: "The concern is this rate of growth will leave us vulnerable to more inflation later on."

Dollar boost, euro trouble

The news immediately boosted the US dollar, forcing the Europe's single currency, the euro, to a lifetime low of $1.0557.

The euro weakness is a clear reflection of the fact that the United States continues to comfortably outperform struggling European economies.

Wall Street, meanwhile, is gearing up for a strong start. The S&P futures index is up strongly, suggesting that the Dow Jones index could well break through the 11,000 points level during Friday trading.

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