Economic growth may be mild, but it’s also durable
Economist: Slow growth allows economy to avoid problems.
The U.S. economy’s tepid performance last quarter — a 2.2 percent annual growth rate, the government said Friday — was typical of the economic rebound that began in the summer of 2009.
Yet the generally sluggish pace of the U.S. recovery masks a sign of strength: This growth spurt has proved to be one of the most durable since World War II. And it seems at no risk of ending anytime soon.
The economic recovery will mark its sixth anniversary in June, meaning it will have already lasted 14 months longer than the average expansion since World War II.
“This recovery has been disappointing in terms of growth so far but if you are looking for a silver lining, it is that the slow rate of growth has allowed the economy to avoid the kinds of excesses that can lead to over-building, overlending or other problems,” said Mark Zandi, chief economist at Moody’s Analytics. “We are a long way from that.”
The longest recovery on record was the 10-year growth period that lasted from March 1991to March 2001. But many economists believe this expansion could surpass that. Zandi said it may only be at the halfway point, meaning it could last another six years.
In the final look at fourth quarter GDP, the government said consumer spending was more robust than previously estimated, though business restocking was weaker.
Consumer spending, which accounts for 70 percent of economic activity, grew at a 4.4 percent rate in the fourth quarter — the strongest performance in eight years and even better than the 4.2 percent estimated a month ago. Export growth also posted an improvement, although those gains were offset by slower growth in business inventories, leaving total GDP unchanged.
The report also showed that inflation was well under control. A price measure tied to GDP rose just 0.1percent in the fourth quarter. Excluding food and energy, prices rose a modest 1.1percent. Analysts said the gain reinforced Federal Reserve’s view that inflation was continuing to fall below its target of 2 percent.
“The economy was on solid footing at the end of the year, while inflation and inflation expectations continue to ratchet lower than expected,” said Bricklin Dwyer, an economist at BNP Paribas.
Economic growth for all of 2014 was also unchanged at 2.4 percent, only a tiny improvement from the 2.2 percent growth seen in 2013. For the past five years, growth has averaged a subpar 2.2 percent.
In 2014, the economy actually shrank at an annual rate of 2.1percent in the first quarter as the country was hit by a series of severe winter storms.