Economy showing signs of life after slow start

Associated Press

WASHINGTON

The U.S. economy is showing signs of more life after a less-than-stellar start to the year.

The government said Friday that first-quarter growth, while disappointing, wasn’t as bad as first thought. And a number of more-recent indicators are showing decent gains in key areas such as consumer spending and housing.

All the signs point to an economy that probably has doubled its momentum this quarter. But faster growth also raises the prospect that the Federal Reserve will want to nudge interest rates higher.

Fed Chairwoman Janet Yellen said exactly that at an appearance Friday at Harvard University. She noted that after weak growth in the fourth quarter of last year and the first three months of this year, it “looks to be picking up from the various data that we monitor.”

She said if the growth continues and the labor market keeps improving, then “probably in the coming months, such a move [rate hike] would be appropriate.”

Yellen, who stressed that the Fed’s plan is to raise rates “gradually and cautiously,” did not specify when exactly a rate hike might occur. But many economists believe it could come as soon as the Fed’s next meeting June 14-15.

Expectations of a possible June hike have been climbing since the central bank surprised investors last week with the release of the minutes of the April meeting. The minutes showed that Fed officials were prepared to raise rates at the June meeting if the economy kept improving.