Economic growth

The economy’s expansion, which began accelerating during last year’s third quarter, continued advancing at a brisk pace through the first quarter of 2004. The Commerce Department reported Thursday that the U.S. economy grew by a solid 4.2 percent annual rate during the January to March period.

While Sen. John Kerry may take some solace from the fact that the first quarter’s growth rate failed to reach the widely expected 5 percent level, he should know that it has been nearly two decades since the American economy has grown as robustly over a three-quarter period as it has since July. During the past three quarters, the economy has been expanding at an annual rate of 5.5 percent. Not since the first three quarters of 1984 has the U.S. economy grown faster over a nine-month period. That performance, of course, foreshadowed the electoral drubbing that President Reagan administered shortly thereafter to Walter Mondale.

Particularly important for the economy’s long-term growth prospects was the fact that business investment grew by 7.2 percent last quarter. It was the fourth quarter in a row that business investment grew rapidly, following nine consecutive quarters of decline. Indeed, during the past year, business investment has increased by nearly 10 percent. During the last four quarters, business spending on productivity-enhancing equipment and software has soared by 13 percent. Meanwhile, exports of both goods and services were about 8 percent higher during the first quarter than they were a year ago.

On the inflation front, the price index for gross domestic purchases, which measures prices paid by U.S. residents, advanced at an annual rate of 3.2 percent during the first quarter, significantly above the 1.3 percent annual pace during the fourth quarter. Rather than being interpreted as a resurgence in inflation, however, such a development should be viewed as a welcome retreat from the worrisome disinflationary forces, which threatened to force the economy into a downward spiral.

If the past three quarters are any guide — and we believe they are — then they confirm an observation made by none other than Mr. Kerry, who told a crowd in Wheeling, W.Va., on Monday that “America is the strongest economy in the world.”