U.S. economy grows a bit

WASHINGTON – The fragile economy improved slightly at the beginning of the year and could grow a bit stronger in the current quarter as extra cash from tax rebates spurs people to buy more. Still, it’s not out of danger yet.

The economy grew at a 1 percent annualized rate in the first quarter, helped in large part by stronger sales of U.S. products overseas, the Commerce Department reported Thursday.

That was a tad stronger than the government’s previous estimate of 0.9 percent growth for the quarter. And, the new reading was better than the anemic 0.6 percent growth rate logged in the final three months of last year.

Nonetheless, the two quarters together marked the slowest growth in five years. The economy has been bruised by housing, credit and financial problems. That led consumers during the first quarter alone to boost their spending at the weakest pace since 2001.

However, the government’s tax rebates, the centerpiece of a $168 billion stimulus package, have helped to energize consumer spending, which should bolster the overall economy’s performance in the April-to-June quarter.

The Federal Reserve specifically credited “some firming in household spending” with a role in keeping the economy expanding.

As the stimulative effects of the tax rebates fade, though, some analysts worry that the economy could hit another rough patch.

“The economy is far from out of the woods,” said Nigel Gault, chief U.S. economist at Global Insight. He believes there will be a “relapse” in the final quarter of this year as the effect of the rebates wanes.

For now the second quarter is shaping up better than many earlier estimates. Some second-quarter projections now range from more than 1 percent to just shy of 2 percent. That still would be considered sluggish. More normal activity would be along the lines of a 2.5 percent to 3 percent pace.