Macro Pulse March 2010 -- U.S. Economic Recovery: Pig in a Poke or the Real Thing?

Executive Summary

The latest estimate of annualized 4Q2009 growth in real gross domestic product (GDP) was upwardly revised to 5.9 percent in February. Activity since then, however, suggests that real GDP growth in 1Q2010 will be 3.4 percent – still respectable but weaker than the previous quarter. That expectation derives from observations of tepid domestic demand thanks to continuing job losses. Although many manufacturing and service industries are enjoying a resurgence, the housing sector appears likely to continue exerting a drag on the economy. Recent dollar strength does not appear to have yet dented U.S. exports, but domestic producers’ need to expand export markets could be frustrated if the current situation is maintained for much longer. A pause in crude oil’s upward price trend is giving the U.S. economy some breathing room, but more stringent environmental regulation and heightened domestic and foreign consumption are likely to push prices higher.

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