By contrast, a child born rich had a 22 percent chance of being rich as an adult, he said.

"In other words, the chances of getting rich are about 20 times higher if you are born rich than if you are born in a low-income family," he told an audience at the Center for American Progress, a liberal think-tank sponsoring the work.

He also found the United States had one of the lowest levels of inter-generational mobility in the wealthy world, on a par with Britain but way behind most of Europe.

"Consider a rich and poor family in the United States and a similar pair of families in Denmark, and ask how much of the difference in the parents' incomes would be transmitted, on average, to their grandchildren," Hertz said.

"In the United States this would be 22 percent; in Denmark it would be two percent," he said.

The research was based on a panel of over 4,000 children, whose parents' income were observed in 1968, and whose income as adults was reviewed again in 1995, 1996, 1997 and 1999.

The survey did not include immigrants, who were not captured in the original data pool. Millions of immigrants work in the U.S, many illegally, earning much higher salaries than they could get back home.

Several other experts invited to review his work endorsed the general findings, although they were reticent about accompanying policy recommendations.

"This debunks the myth of America as the land of opportunity, but it doesn't tell us what to do to fix it," said Bhashkar Mazumder, a senior economist at the Federal Reserve Bank of Cleveland who has researched this field.

Recent studies have highlighted growing income inequality in the United States, but Americans remain highly optimistic about the odds for economic improvement in their own lifetime.

A survey for the New York Times last year found that 80 percent of those polled believed that it was possible to start out poor, work hard and become rich, compared with less than 60 percent back in 1983.

This contradiction, implying that while people think they are going to make it, the reality is very different, has been seized by critics of President Bush to pound the White House over tax cuts they say favor the rich.

Hertz examined channels transmitting income across generations and identified education as the single largest factor, explaining 30 percent of the income-correlation, in an argument to boost public access to universities.

Breaking the survey down by race spotlighted this as the next most powerful force to explain why the poor stay poor.

On average, 47 percent of poor families remain poor. But within this, 32 percent of whites stay poor while the figure for blacks is 63 percent.

It works the other way as well, with only 3 percent of blacks making it from the bottom quarter of the income ladder to the top quarter, versus 14 percent of whites.

"Part of the reason mobility is so low in America is that race still makes a difference in economic life," he said.

Over the past year real national output has risen by 3.5 per cent.

Consumer spending rose by 5.5 per cent in the first quarter, following a rise of just 0.9 per cent in the previous three months.

Fixed non residential investment rose by 14.3 per cent, up from 4.5 per cent - pointing to continuing strength in business inestment.

The figures add to recent evidence that US industry remains in rude good health.

Import growth continued to outpace exports, with a rise of 13 percent compared to 12.1 for exports.

The price deflator - a broad measure of inflation - was up 3.3 per cent, slightly slower than at the end of 2005.

Ian Shepherdson, chief US economist at High Frequency Economics, siad final demand overall was solid, but he predicted that growth in the second quarter would be substantially slower.

"Q2 will be much weaker. We expect growth to slow to 3 per cent or less, led by a sharp slowing in consumption," he said.

The US Bureau of Economic Analysis said personal spending increased 5.5 per cent in the first quarter, compared with an increase of 0.9 per cent in the fourth. Durables goods purchases jumped 20.6 percent, in contrast with a fall 16.6 percent in the previous quarter.

Final sales of computers contributed 0.11 percentage point to the first-quarter growth in real GDP after contributing 0.33 percentage point to the fourth-quarter growth. It said motor vehicle output subtracted 0.23 percentage point from the first-quarter growth in real GDP after subtracting 0.64 percentage point from the fourth-quarter growth.

Economic analsyts had been expected growth of about 4.9 per cent, up from earlier expectations after signs of a robust three months for the economy.

More recently, durable goods orders this week showed a surge of 6.1 per cent in March, more than three times faster than analysts had been expecting and suggesting that US industry remains in strong shape.

On Thursday, Ben Bernanke, Federal Reserve chairman, indicated that the economy had continued to grow at a solid pace, saying there had been generally strong economic data since the Fed's last policy meeting in March.

The government reported new homes sold at an annual rate of 1.21 million homes in March, up 13.8 percent from a revised 1.07 million pace in February. That easily topped forecasts for a 1.1 million pace from economists surveyed by Briefing.com.

The jump, the biggest since a 16 percent rise in April 1993, came even as mortgage rates hit an average 6.32 percent last month for 30-year fixed-rate loans, according to Freddie Mac, up from 6.25 percent in February.

The mortgage rate was the second-highest for any month since 2002. Rates have risen further since, climbing to 6.53 percent in the most recent weekly survey.

With rising mortgage rates driving up the cost of financing home purchases, most economists have been looking for the real estate market to cool off in 2006 after several years of record sales.

But economist Bob Brusca of FAO Economics said last month's drop in new home prices is a sign that the market for new homes isn't nearly as strong as the jump in sales would suggest.

He noted that the report showed an unusual drop in prices from both February and a year earlier, which could be a sign that home builders are cutting prices to move a large supply of new homes now on the market.

"New homes sales sprang back to life like a zombie in a cheap horror flick," Brusca said. "And like that zombie, housing really is dead. Don't let all that twitching fool you."

He said that many of the new homes sold in March were probably built in a stronger real estate market.

And unlike existing homes, where sellers can live until they get an acceptable price, "builders can't live in these houses unless they have a lot of family," he said. "By and large they must finance them at rising interest costs."

In fact, about one builder in five has reported a jump in cancellations of new home orders, according to a recent industry survey. And Wednesday's report showed that there were 553,000 new homes for sale in March, up 25 percent from a year earlier.

Meanwhile, average prices fell 7.1 percent from February to $279,100, after topping $300,000 for the first time in the February revised figures. The median price, which reflects the point at which half the homes sell for more and half sell for less, also fell 6.5 percent to $224,200.

And while month-to-month declines in home prices are not unusual, more significantly, prices also fell from a year earlier: a 2.2 percent decline in median prices and a 3.6 percent fall in average prices over that time.

Still, Wednesday's big jump in sales came after existing home sales also showed an unexpected increase last month in a report from the National Association of Realtors Tuesday.

New home sales, while a fraction of the overall real estate market, are more closely watched since they're more of a leading indicator of conditions in the housing market.

Existing home sales are recorded at closing, typically a month or two after a purchase agreement, while new home sales are tracked based on when contracts are signed.

The fact that Mr Bernanke called the widening US current account deficit "a challenge" also emboldened the dollar bears.

However Paul Chertkow at Bank of Tokyo Mitsubishi said concern over funding of the US current account was premature. "Even if the Fed raises the federal funds rate only one additional quarter point, the US yield curve is likely to remain much more attractive to foreign investors than the eurozone or Japanese yield curves this year," he said.

Against the yen, the dollar recovered some ground, rising 0.1 per cent to Y114.33 after hitting a three-month low on Thursday.

The yen also fell against the euro, slipping 0.3 per cent to Y143.43, as the Bank of Japan decided to keep interest rates on hold, despite data which showed that Japanese core annual inflation remained positive for the fifth consecutive month.

Speaking after the decision, Bank of Japan governor Toshiko Fukui said the central bank would not rush into raising rates, and that judging the right time to make a move would be difficult. "We see difficult times ahead but we're not in a great hurry, at the same time we are not too relaxed," he said.

Analysts at UBS said they believed the BoJ looked increasingly likely to raise rates from the third quarter of 2006. "We think the macroeconomic case for a stronger yen remains," they said. "We continue to target dollar/yen at Y108 over three months."

Mr Otellini had announced a "wholesale look" at the world's biggest chipmaker at its quarterly results presentation last week, when Intel announced profits had fallen by a third. He gave analysts more detail, saying "no stone will be left unturned ... we will see a leaner, more agile and more efficient Intel Corporation after the end of this project".

Mr Otellini said it would be too simplistic to cut its 100,000-strong global workforce. There would be a deep analysis over 90 days that would tackle non-performing businesses, market conditions and employee productivity.

"You have the full commitment of the management team to make Intel a different type of company, a more nimble company," he said.

The review will be the biggest since the company was transformed in the mid-1980s from a memory chip company to one focused on microprocessors. Intel is promising a $1bn reduction in costs this year and a $300m cut in capital spending.

Intel expects sales to fall 3 per cent in 2006 after three years of double-digit growth and at a time when the rest of the industry is performing strongly. Its stock has fallen more than 20 per cent so far this year to become the worst performer on the Dow Jones Industrial Average.

Intel shares were up 2 per cent to $19.87 in midday trading following Mr Otellini's comments.

The company holds more than 80 per cent of the market for the dominant "x86" family of PC microprocessors but has lost share to Advanced Micro Devices in recent quarters. Thus far, it has also failed to penetrate significantly the high-growth market for mobile phone chips, led by Texas Instruments.

Mr Otellini said Intel saw PC growth being in the single digits in 2006 - lower than analysts are currently predicting and after three years of double-digit growth for the industry. Its customers had a backlog of several million of its microprocessors in their inventories, but he expected this to be burnt off by the second half.

Intel expects to stage a comeback in the second half with three new processors, codenamed Woodcrest, Conroe and Merom for servers, desktops and notebook PCs and released in June, July and August respectively. They feature two cores or "brains" inside Intel's first new microarchitecture in five years.

In addition, money supply data, a number closely watched by the ECB, showed a marked acceleration in annual growth, with the M3 measure increasing by 8.6 per cent in March against 7.9 per cent in February.

Jean-Claude Trichet, ECB president, has indicated that it is unlikely the central bank will raise interest rates at its May meeting, but with inflation rising so sharply above his target of 2 per cent, and with more cash sloshing around the system than expected, it is now more probable he will tighten monetary policy in June.

A survey of business optimism only added to expectations of a move by the ECB. The European Commission said its eurozone economic sentiment indicator hit a five year high of 105.3 in April, up from 103.6 in March. The business climate indicator, meanwhile, hit its highest level since December 2000, boosted by hopes for a continued upturn in industrial production.

Households are also more bullish, said the Commission, with the consumer confidence indicator rising 1 point to minus 10.

But the improvement was not uniform. The German Federal Statistics Office said retail sales in the country fell by 2.7 per cent in March, while Insee said French consumer confidence declined in April following protests against the governments employment laws.

Howard Archer at Global Insight agreed with the market's assessment that Mr Trichet would tighten monetary policy in June, but dismissed calls from some quarters for the hike to be 0.5 percentage points rather than the more likely 0.25.

"With eurozone sentiment and economic activity likely to be increasingly pressurized by a stronger euro and high oil prices, the ECB needs to be wary about stifling growth through raising interest too aggressively over the coming months," said Mr Archer.