The U.S. economy posted stronger growth than expected in the first three months of the year, expanding at an annual rate of 3.5%.

The latest reading of economic growth in the January-to-March quarter surpassed the 3.1% preliminary estimate issued by the U.S. Commerce Department last month.

A smaller U.S. trade deficit put less of a brake on growth during the quarter, the government said. Higher spending on housing also spurred the economy.

The most recent figure was still slightly below the 3.6% annual rate that economists had been forecasting and down from the 3.8% growth rate seen in the final three months of 2004.

There had been some indications that the U.S. economy slowed somewhat in March, but recent economic data suggest the “soft patch” has passed. Employers added 274,000 jobs in April, surpassing March’s 146,000 new positions.

The Canadian economy rose by 0.3% in February after increasing by 0.2% in January. Growth figures for March will be released on May 31.

Meanwhile, the U.S. Labor Department said new claims for unemployment insurance rose by 1,000 to a seasonally adjusted 323,000 last week. The four-week average climbed to a one-month high of 330,500.