Some pessimists have turned optimistic. Not long ago, there were predictions that the current recession might be the most severe since the great depression. Now, as interest rate spreads seem to be returning to more normal conditions, and stock prices rise and tax rebate checks arrive, there is some sentiment that 3 percent GDP growth (annualized) might return as early as the second quarter of 2008.

The economy was never headed to severe recession. Nor can a $14 trillion economy pivot to a more robust pace in a short time. It certainly can't if consumer spending on big-ticket items remains soft. And with consumer attitudes as low as they are, expecting a sharp turnaround in vehicle sales or other consumer durable goods is probably overly optimistic. The latest decline in industrial production reflects weakness in the auto and housing-related sectors. Auto sales are not continuing to decline. Housing may in fact be finally reaching a bottom, almost two years in to the current slump. Conversely, there is not much strength elsewhere to offset the weakness in these sectors.

In short, the economy is not strong enough yet to deliver 3 percent GDP. But neither is it so weak as to drop into a sharp downtown this summer. More realistically, with the economy now in its third straight sluggish quarter, more slow economic growth (and modest job declines) could be ahead. The good news is the start of some return to more normal credit market conditions. The bad news could well be the 0.1 percent rise in the "core" CPI (which excludes food & energy) in April. That would only be good news if costs were rising by 0.1 percent.

The domestic economy is growing by less than 1 percent for the third consecutive quarter. The global economy has slowed to about 4 percent, down from nearly 5 percent achieved in 2007. Growth in China and India is probably in a range of 7-to-9 percent. Growth elsewhere in the East Asia as well as in Europe is somewhat slower. The Leading Economic Indexes across the globe generally softened in recent months, a clear signal that the world economy has lost a little steam.

There is a world of difference however, between losing steam and grinding to a halt. The domestic economy may be close to the latter but not so for the globe. In fact, the Leading Economic Indexes for some of the other countries are either improving (Mexico), no longer declining (Japan) or still experiencing mostly small decreases (U.K. and France in Europe, or Korea and Australia in the Pacific). Japan's economy is a good case in point: GDP grew by more than 3 percent in the latest quarter but growth is likely to be a little slower in the current quarter. A third consecutive monthly drop in vehicle orders reflects softness in the consumer sector. The latest Tankan survey reflects some scaling back in investment intentions, especially in the high-tech area.

Higher energy and food prices and a frozen credit market are some of the factors that led to a less robust global economy. Housing market declines (though not as severe as domestically) also have played a role. It nevertheless is a mark of the resiliency in both consumption and investment that these negative factors have not taken a greater overall toll on the pace of economic activity. Going forward, that resiliency might be the factor that makes 2009 a much better year than 2008. And growth north of 4 percent this year isn't all that bad, considering.