Is the U.S. Economy Really Growing? Here's Another Look

The U.S. economy grew by 3.2 percent annualized in the first three months of 2010. It wasn't terribly strong growth, but it was the right kind of growth. As Dan Indiviglio explains, consumer spending -- which generally accounts for about two-thirds of the economy -- made up 80 percent of GDP growth in the first quarter of 2010. That's good. For comparison, consumers made up less than a seventh of the economy's 5.6% expansion in the last quarter of 2009.

Here's another look at the economy, via the Chicago Fed's National Activity Index:

Led by improvements in production- and employment-related indicators, the Chicago Fed National Activity Index increased to -0.07 in March, up from -0.44 in February. Three of the four broad categories of indicators that make up the index made positive contributions in March, while the consumption and housing category made the lone negative contribution.

And that graph:

So yes, things are getting better. Inventories were replenished in late 2009, and consumers started spending them down in early 2010. We should expect disposable incomes to start rising in the next few quarters as steady consumer demand encourages businesses to hire again and to full-time their part-timers. Then again, the housing market -- which helped drive the last boom -- is still in the worst shape in the last 50 years. That's a heavy anchor.