The economy soared to an annual growth rate of 7.3% in the final quarter of 1999, the best showing since the first quarter of 1984. Primary contributors were stronger consumer spending, inventory building and exports. The economy has grown at a rate of over 4% for three consecutive years.
The final 1999 figures from the Commerce Department demonstrated the momentum the economy had coming into 2000. The Federal Reserve, having already raised interest rates five times since last June, will likely respond with further tightening to cool the economy and quell fears of inflation. Data for 2000 indicates the economy is still speeding ahead, with many analysts predicting first quarter growth above 5%. While this figure is under the fourth quarter of 1999, it is still greater than the Federal Reserves' desired 3.5% growth rate.
Consumer spending was strong across the board with the strongest components being automobiles and home furnishings. The rise in market interest rates didn't slow big-ticket purchases in December, but slightly slower home sales have characterized the first quarter of 2000.
The GDP price deflator, which gauges inflation, came in at 1.9%, the second quarter approaching 2% in the last four. Business investment was the only major component with slower growth, but much of that was due to a pre-Y2K lockdown in computer equipment purchases.
The GDP is the total of goods and services produced within the U.S. There are three estimates of the quarterly report, released by the Bureau of Economic Analysis.