The U.S. economy expanded at an annual rate of 5.6 percent in the first quarter, propelled by a surge in consumer spending that has since faded as gasoline prices soared.
The gain in gross domestic product, the value of all goods and services produced, is the biggest in more than two years and follows a 1.7 percent pace in the last three months of 2005, the Commerce Department said in Washington. The reading is stronger than the 5.3 percent pace the government reported last month as the trade deficit widened less than previously estimated.
Business investment, which rose at the fastest pace in almost six years, and government spending also contributed to the improved reading in the first quarter.
Consumer spending rose 5.1 percent at an annual rate last quarter, the most since the third quarter of 2003.
A measure of inflation tied to the GDP report rose at an annual rate of 3.1 percent, less than the 3.3 percent that the government estimated last month.
The increase in prices tied to consumer spending and excluding food and energy costs, the measure preferred by Fed policy makers, rose at a 2 percent annual rate, putting it at the top of the 1 percent-to-2 percent range Chairman Ben S. Bernanke and other policy makers have said is acceptable.