WASHINGTON (AP) -- The economy sprang out of a year-end rut and zipped ahead in the opening quarter of this year at a 5.6 percent pace, the fastest in 2 1/2 years and even stronger than previously thought. The new snapshot of gross domestic product for the January-to-March period exceeded the 5.3 percent growth rate estimated a month ago, the Commerce Department reported Thursday. The upgraded reading - based on more complete information - matched economists' forecasts.The stronger GDP figure mostly reflected an improvement in the country's trade deficit, which was much less of a drag than previously estimated.
The opening quarter's energetic performance followed a lethargic showing in the closing quarter of 2005 when the economy grew by a feeble 1.7 percent pace. Fallout from the Gulf Coast hurricanes, including high energy prices, prompted belt tightening by people and businesses.
Consumers and businesses came roaring back in the first quarter, though, a main reason why the overall economy performed so well. Consumers boosted spending in the first quarter at a 5.1 percent pace, compared to a meager 0.9 percent growth rate in the fourth quarter. Businesses ramped up spending on equipment and software at a brisk 14.8 percent pace, up from a 5 percent growth rate in the prior quarter.
And, companies' profits continued to grow briskly. One measure of after-tax profits in the GDP report showed profits rose 13.8 percent in the first quarter. It was the second consecutive quarter of such strong growth.
The trade picture improved as imports didn't grow as much as previously estimated. That meant the trade deficit shaved only 0.24 percentage point from GDP, compared with a 0.55 percentage-point reduction calculated a month ago.