Not quite doomsday yet

The doomsday predictors may not like it, but it seems the US economy actually grew last quarter.

The 0.6% sequential growth of real GDP corresponds to 2.5% YoY growth from March 2008 to March 2007. This 0.6% growth is higher than the US Fed’s own projections (made in Oct and revised down in Jan). To be fair, the Fed didn’t provide projections for growth by quarter (only annual), but if we interpolate the quarters through a simple straight-line approach, this quarter should have been flat – that is, 0% sequential growth. Caveat: We should keep in mind that the numbers released yesterday are “Advance” numbers. There are two more rounds of refinement to come: “Preliminary” and the “Final” estimates of GDP growth for last quarter.

The bad news: The US Fed is indicating that it expects a business-side spending slowdown as a risk. And inflationary pressures may finally be leading the Fed to putting a pause to recent rate cuts. So the doomsday people may still have a chance to rejoice later in the year :)