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Economic data don't point to boom times just yet

There are a number of reasons that would be the case. American households are trying to reduce debt to stabilize finances. But they are doing so slowly, with total household debt at 94 percent of gross domestic product in the fourth quarter down just slightly from 96 percent when the recession began in late 2007.

By contrast, that ratio of household debt to economic output was 70 percent in 2000. To get back to that level, Americans would need to pay down $3.4 trillion in debt -- and if they do, that money wouldn't be available to spend on goods and services. No one knows where household debt levels will settle, but assuming that they are lower than the ultra-leveraged 2005-2008 period, getting Americans' balance sheets in line will be a drag on economic activity.

Moreover, as the recovery progresses, major government supports for growth will eventually be pulled away. The boost from stimulus spending will start waning in the second half of this year, while the Federal Reserve, which has already ended its unconventional programs to prop up the economy, will eventually raise interest rates.

"When you have a recession that's amplified by a deep financial crisis, the recovery is slower and more painful, much akin to recovering from a heart attack," said Rogoff, who authored a history of financial crises, "This Time Is Different," with Carmen Reinhart. "It just takes time. If you look at a typical recovery, we would be growing at 7 or 8 percent by now given the depth of our fall."

Other economists say that a stronger burst of growth could be near. Corporate America, having slashed inventories during the downturn, now appears to be on the verge of rebuilding them. That should lead to stronger economic activity, some economists say, as workers are needed not merely to supply the goods people are buying, but also to restock store shelves.

"There is a momentum building up which is really just beginning and it's got a way to go," former Federal Reserve chairman Alan Greenspan said recently on "This Week," the ABC news show. The nation, he said, is "on the edge of a significant build-up" in inventories, which creates "a self-reinforcing cycle."

But even if Greenspan is right, skeptics argue that the impact is likely to be short-lived.

"I buy the idea that inventories can be a big positive to growth, but the inventory cycle is well advanced already," said Jan Hatzius, chief economist at Goldman Sachs.

"Most of the deeper recessions in postwar U.S. history have been followed by strong recoveries, but this is a housing-bust experience," said Hatzius, who expects growth to taper off to only a 1.5 percent rate in the second half of the year. "And if you look at international evidence, those have generally been much more moderate."


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