The Bureau of Economic Analysis surprised many analysts by announcing that the U.S. economy actually accelerated slightly in the first quarter of 2001. The new figures on real Gross Domestic Product, while still preliminary, put the low point for the national economy in the fourth quarter of 2000, when the economy managed only a 1.0 percent annual rate of expansion. The question in the coming weeks is whether or not the BEA's portrait of the 2001 U.S. economy is sufficiently robust for policymakers and politicians to call off the death watch on the still living and breathing economic expansion. 

The 2.0 percent rate of expansion in the overall economy for the first quarter of 2001 was unquestionably on the high side of most people's expectations for the GDP report. The stronger than expected result was produced largely because of an abrupt rebound in consumer spending on durables and improvement in the balance of trade.Business spending on equipment remained very weak, but speculative investment in housing continued its double digit rate of growth. 

Those of us who were expecting much weaker results, or even calling for a recessionary contraction in the economy, are left to ponder what went wrong with our forecasts. Or, to put it more positively, what went right for the economy? 

Observing the economy from an Indiana perspective, where the effect of the business spending slowdown and the shutdowns in steel and motor vehicles can be seen in almost every community, might have made us too pessimistic. We know that the goods-producing side of the economy has been shrinking in relative size in the U.S. for decades, so was this a case of manufacturing and the rest of the economy moving in different directions? 

But the pure and simple fact from the GDP report is that it was consumer spending on durable goods, the old-fashioned driver of expansions throughout this century, that powered the overall economy towards faster growth. Indeed, the 11.9 percent rate of increase in durable goods spending, coupled with the continued slide in industrial output, resulted in an aggregate decrease in business inventories of $7.1 billion. This is the first decline in inventories in more than five years. 

Additionally, businesses' and consumers' sudden distaste for imports made that heady spending reverberate more loudly in the domestic economy. Total spending on imported goods plummeted at a surprising 11.7 percent rate. Even though exports were also off in the first quarter of 2001, the net effect was a gain for the overall economy. 

If the preliminary estimates hold up, it would appear that the inventory correction in manufacturing that has caused so much anguish to households and state governments is over, and that higher production schedules are ahead. 

There's still plenty to worry about for near-term future of the national economy. But its also clear from our first quarter economic report card that consumers have thus far been able to put it all in perspective.