WASHINGTON – After a dismal start to the year reflecting a harsh winter, the U.S. economy showed signs of rebounding in the spring, with many forecasters expecting growth to be even stronger in the second half of the year.
The government on Wednesday will provide its first estimate of how much the gross domestic product — the economy’s total output of goods and services — grew in the April-June quarter. The consensus forecast is that the economy expanded at an annual rate of 2.9 per cent, according to a survey of economists by data firm FactSet.
That would mark a dramatic rebound from the January-March period, when the economy shrank at an annual rate of 2.9 per cent. It was the biggest contraction since the depths of the recession five years ago.
Normally, such a plunge in economic activity would arouse fears about a recession. But analysts have largely dismissed this year’s stumble as the result of a set of adverse developments that should be temporary.
The biggest culprit: An unusually severe winter, which depressed consumer spending by keeping shoppers away from malls and auto showrooms and disrupted other activities such as factory production.
With warmer weather, consumer spending is expected to recover. The economy should also get a boost from stronger residential activity, less of a cutback in business stockpiling and a rebound in business capital spending on new equipment.
“The economy is bouncing back from a terrible first quarter,” said Brian Bethune, an economics professor at Tufts University.
Still, with the rocky start to the year, analysts have marked down expectations for all of 2014. A recent survey of top forecasters with the National Association for Business Economics estimated growth for all of 2014 at a sluggish 1.6 per cent, even slower than last year’s 1.9 per cent growth.
But many analysts think the economy is on the verge of an acceleration after subpar annual growth rates of around 2 per cent through the first five years of recovery from the Great Recession, which officially ended in June 2009.
Mark Zandi, chief economist at Moody’s Analytics, said he thinks growth could accelerate to above 4 per cent in 2015. He said he expects support from continued solid gains in hiring, which should translate into strength in consumer spending. Employers have added at least 200,000 jobs for five straight months — the best such stretch since the late 1990s tech boom.
“I think we are finally going to start seeing more wage growth and that should kick the economy into high gear by late 2015,” Zandi said.
When the Federal Reserve ends a two-day meeting Wednesday, analysts think it will keep a key short-term rate at a record low near zero for the rest of this year and into 2015. The first rate increase is expected by mid-2015, after the economy and job market strengthen further.