The economic output of the United States grew at an annual rate of 2.2 per cent in the first quarter of the year, easing from the prior quarter's growth rate of 3 per cent but maintaining what many economists have started to call a ‘sustainable' pace of recovery.
The economy has been growing, though painfully slowly, since the second half of 2009, and the recovery accelerated throughout all of 2011. Early this year, economists forecast a weaker showing for the first quarter, and many revised their numbers upward in the past few weeks as several economic indicators came in better than expected.
Still, mixed signals continue to cloud the picture, raising fears among some economists of a repeat of last year's spring slowdown: Shipments of durable goods increased last month, but new orders showed their steepest drop since January 2009 (mostly because of a decline in aircraft orders); the trade balance improved but job growth weakened and new unemployment claims have risen.
Other analysts shrugged off the variations as normal, pointing out that economies do not move in a straight line.
Growth has not accelerated enough to make much of a difference in the Federal Reserve's outlook.
This week, Fed officials revised their growth projections up slightly, predicting 2.4 per cent to 2.9 per cent growth for the year, up from 2.2 per cent to 2.7 per cent. The Fed chairman, Ben S. Bernanke, also said the Fed would stick to its current plans to keep interest rates low until late 2014.
In the long-term, the Fed said it expected unemployment to fall very slowly, remaining as high as 6.7 per cent by the end of 2014.
“The committee expects economic growth to remain moderate over coming quarters and then to pick up gradually,'' a Fed statement said.
Growth of 2.2 per cent is too slow to make up for lost ground.
“I don't think the issue is whether or not the growth rate is sustainable,'' said Steven Blitz, chief economist of ITG Investment Research. “I think the question is whether the growth rate that's sustainable is acceptable politically and socially acceptable.''
Another question is how much the growth rate can increase with so many external threats, such as a global slowdown and potential crisis in Europe.
On Thursday, Standard & Poor's downgraded Spain's credit rating by two notches, underscoring fears that the country will require a bailout. Gas prices have begun to subside, but tensions with Iran make global energy prices unpredictable.
One of the unexpected upsides to the economy in the first quarter has been strong corporate earnings.
