WASHINGTON — The U.S. economy’s tepid performance last quarter — a 2.2 percent annual growth rate — was typical of the economic rebound that began in summer 2009. Yet the sluggish pace of the recovery has a silver lining: This growth spurt has proved to be one of the most durable since World War II.
Will it last? It will depend on factors in the months ahead, including a potential rate hike by the Fed, the strong dollar, oil prices and consumer spending.
The economy’s performance in the October-December period matched the average growth of the past five years — a lackluster pace that has been far lower than the growth gains normally seen coming out of such a deep recession.
But like the turtle versus the hare, slow and steady may win the day. The current expansion will mark its sixth anniversary in June, meaning it will already have lasted 14 months longer than the average expansion since the end of 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 overbuilding, 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 from March 1991 to 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.
Hopes for the current recovery stem from the extremely low rates of inflation — just a rise of 1.1 percent in the fourth quarter, according to a price gauge tied to the gross domestic product. That is below the Fed’s 2 percent target and means the central bank will not be in a rush to begin raising interest rates.
While many forecasters believe the Fed will start hiking rates this year, it will be starting from a record low, near zero, where the Fed’s benchmark rate has been for the past six years. Most forecasters don’t expect more than two small quarter-point increases this year, meaning rates still will be below 1 percent at the end of the year, a level still very favorable for borrowers.
