During the fourth quarter of last year, our economy expanded at a 3% rate, and there was a collective sigh of relief.  We knew there was a slowdown during the first quarter.  A survey of economists expected the GDP growth rate for the first quarter would be only 2.5%, which is not great but certainly acceptable.  Unfortunately, it only increased 2.2%.

It would have been worse except consumer spending was up strong at 2.9%, compared to only 1.9% in the fourth quarter.  This would be great, if consumers were making enough money to afford increased spending.  Unfortunately, consumer savings decreased, another testimony to the seductive power of advertising to make consumers do things that are harmful to themselves.

The all-important level of business spending, which was up 5.2% in the fourth quarter, actually fell by 2.1% in the first quarter.

Defense spending also decreased, which hurt our GDP growth rate.  I don’t understand this number and will study it more.  However, it does give a quick idea of what happens to our economy if sequestration happens next year.

This slowdown was confirmed by the decrease in durable goods orders on Wednesday and the slowing employment gains on Thursday.

So, is our economic recovery derailed?  No, not yet.  Slowdowns are commonplace.

Could it be derailed?  Absolutely, but I don’t think it is likely, unless there is a real financial collapse in Europe, not an economic collapse, but a financial one.

Remember:  the “new normal” is a long, slow run toward recovery, unless we have a “Jim Fixx” moment, which is most likely to come from Europe . . . or Congress.