The contraction in output in the first quarter was just a blip. The available activity data suggest that the economy returned to growth in the second quarter. But growth won’t be as strong this year as it was last. Unemployment is about as low as it is ever likely to get, overtime working hours are close to record highs and capacity usage is the highest it has been in decades. With spare capacity exhausted, a return to last year’s above-trend rate of expansion is not on the cards.
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