BBC Friday, 27 April, 2001, 14:06 GMT 15:06 UK

US economy stronger than expected

Federal Reserve Chairman Alan Greenspan had feared that the economy had stalled The US economy has grown by 2% during the first three months of 2001 - twice as fast as analysts had predicted.

The surprisingly strong growth has reduced the widespread fears of a recession.

"The overall numbers were considerably stronger than most, if not all, economists had expected," said First Albany's chief investment officer Hugh Johnson.

US stock markets rallied on the news, while the dollar gained sharply against the euro and the yen..

"[Analysts'] expectations were 1%, but really most traders were expecting [even] less than that," said Fleet Global Markets economist Greg Anderson.

The US gross domestic product figures were double the growth rate seen during the last quarter of 2000.

Consumer spending boost

Strong trade figures and a healthy rise in consumer spending aided the economic growth, the US Commerce Department reported.

"The surprise in general to me is the strength in consumer spending....[which] rose at a 3.1% annual rate. Most of that is because of fairly strong auto sales," said Mr Johnson.

"The increase in consumer spending offset the weakness in business investment," he said.

The US economy is now in its ninth year of economic expansion. Much of the strong growth has been attributed to impressive gains in the productivity of US workers.

Alan Greenspan, chairman of the US central bank, the Federal Reserve, and the man credited with engineering much of the economic expansion, said the productivity gains were likely to continue despite the slowdown in the economy.

Speaking to US bond traders, Mr Greenspan some moderation in productivity growth would be likely, but the lull should be only temporary.

Uncertain future

"This was a little bit of a surprise, but that doesn't make anyone very upbeat about the second quarter because there still is the expectation that consumer spending is going to slow," Mr Johnson said.

"Most of the good activity occurred in January and the numbers for March are less encouraging," agreed Lasalle Bank's Carl Tannenbaum.

"The second quarter will be the roughest because we have another round of consumer confidence falling and the job market is a lot shakier," he said.

The US economy must expand at a rate of 4% to ensure full employment, economists predict.

The GDP figure measures the total output of goods and services in the economy.

-- Anonymous, April 28, 2001