The latest reading on gross domestic product, released by the Commerce Department on Thursday, was an upgrade from the 3.1 percent pace initially estimated for the January-to-March quarter.
The higher estimate for economic growth mostly reflected a slight improvement in the nation's trade deficit, which was less of a drag on growth than the government previously thought. More brisk spending on housing projects also helped.
GDP, the broadest barometer of the economy's fitness, measures the value of all goods and services produced within the United States.
The new reading is close to the 3.6 percent growth rate that economists were forecasting before the release of the GDP report.
The 3.5 percent pace clocked in the first quarter of this year — while better than an initial calculation for the quarter — still represented some slowing from the 3.8 percent pace seen in the final quarter of 2004. Higher energy prices and borrowing costs did make consumers and businesses a bit cautious in the first quarter, the main reason for the moderation in overall economic growth compared with the previous quarter.
However, recent economic reports have suggested that the economy, which hit a rough patch in March, is bouncing back.
Importantly, employers boosted payrolls in April by 274,000, a noticeable improvement from the lackluster 146,000 new jobs generated in March. The employment report for May will be released by the government next week, and economists are forecasting a gain of around 175,000, which would be respectable but not spectacular job growth.
In other economic news Thursday, the Labor Department said new claims for unemployment insurance rose by 1,000 to a seasonally adjusted 323,000 last week. Even with the increase, the level of claims still points to an improving job market, analysts said.
President Bush wants the job market, the overall economy and certainly the financial markets to be on sound footing as he sells his overhaul of Social Security, which would allow workers to set up personal investment accounts in stocks and bonds.