To begin with, the economic data looked brighter at this point in 2010 and again in 2011, only to fade as we got into the second and third quarters of those years.1 Moreover, the United States has experienced unusually mild weather over the past few months, with the number of heating degree days in January and February about 17 percent below the average of the preceding five years. While this reduces the amount that households and businesses must spend for heating, I suspect that it temporarily boosts economic activity overall. For example, the mild weather is certainly conducive to higher than normal levels of construction activity, and we did see a surge in hours worked in that sector over the past few months. More importantly, real economic activity has yet to be strong enough on a sustained basis to make a big dent in the overall amount of slack in the U.S. economy. While it is true that growth was stronger in the fourth quarter, most of that growth was due to inventory accumulation. Growth of final sales was actually quite weak. Historically, a quarter in which inventory investment makes a significant growth contribution is typically followed by a quarter in which that growth contribution is modest or even negative. That appears to be what is shaping up for the first quarter of this year. Based on available data, current expectations are that real GDP will expand at around a 2 percent annual rate during the first quarter of 2012.
William C Dudley: The national and regional economic outlook Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Long Island Association, Melville, New York, 19 March 2012. *  *  *  Good morning. I am pleased to be here on Long Island. It is always a pleasure to speak with the business community because of the leadership role you play in your communities and in shaping the economic landscape in the region. So, I thank you all for coming today. Over the past few years, I have been engaged in a series of outreach meetings all across my Federal Reserve District. For example, in 2010 I visited several upstate cities. Early last year I made visits to various parts of the city – Brooklyn, the Bronx, Queens – and to Puerto Rico. In August, I met with community and business leaders and elected officials in Newark, Patterson and Jersey City. In November, I went to West Point and the Capital region. I consider these visits just as important as my trips to Washington, D.C., to help formulate monetary policy or to Switzerland to help shape international bank regulation. Each visit within the region helps me to deepen the relationships with the people I represent. I believe that the understanding of issues and concerns that I gain today will help ensure that the Fed’s policy decisions reflect the public interest in the broadest sense.