Economy picks up despite deflation

The economy grew at its fastest pace in three quarters as an export surge prompted companies to increase capital spending even as the nation endures persistent deflation at home.

Gross domestic product rose 4.9 percent pace in the first three months of 2010 at an annual rate, less than forecast, a Cabinet Office report showed Thursday. So-called nominal GDP, which is unadjusted for price changes, increased 1.2 percent on a quarterly basis, the most in a decade.

The export-fueled rebound also started feeding into wages and the labor market. Earnings rose for the first time in 22 months in March and the ratio of job openings to applicants advanced for a third month.