US economy likely struggled last quarter; mild rebound seen

WASHINGTON – After struggling in the final three months of 2015, the U.S. economy is thought to be rebounding in the current quarter, though not as strongly as most analysts had once expected.

On Friday, when the Commerce Department issues its third and final estimate of growth for the October-December quarter, it's expected to say the economy expanded at a 1 percent annual rate. That would be the same estimate it made a month ago and would amount to just half the 2 percent annual growth in the July-September period.

For the current January-March quarter, many economists foresee growth as measured by the gross domestic product — the total U.S. output of goods and services — accelerating to a 2 percent rate. But some analysts have been downgrading their estimates of late, reflecting some weaker-than-expected economic data.

Analysts at forecasting firm Macroeconomic Advisers, for example, on Thursday reduced their forecast of first-quarter GDP growth to a 1.5 percent annual rate after the release of a weak report on new orders for long-lasting manufactured goods. Those orders dropped 2.8 percent in February.

That decline was seen as a sign that the nation's manufacturing sector is still struggling with weakness overseas and a strong dollar, which has made American-made products more expensive in foreign markets.

This year, continued strong gains in hiring could boost household incomes and support solid increases in consumer spending, which accounts for about 70 percent of economic activity.

This month, the Federal Reserve left its key policy rate unchanged after having raised it from a record low in December. Fed officials also scaled back their expectations for the number of rate hikes this year from four to two.

The officials said they thought the global economy and financial markets still pose risks even though financial markets have stabilized since the year began. Stocks had nosedived after investors worried about how steep the slowdown would be in China, the world's second-largest economy.

Analysts have forecast that for 2016 as a whole, the economy will grow around 2 percent. That would be down from last year's 2.4 percent growth.