Economic recovery tentative

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As war in Iraq fades from the headlines, optimists are saying the economy is poised on the launching pad, ready for liftoff. By midsummer, if not before, they maintain, the expansion will build momentum and activity will head skyward.

Unfortunately, the economic recovery that began about 18 months ago has defied the experts on many occasions. Each time it tries to accelerate, it fails to reach the heights.

"We would not be surprised to see things continue to look shaky for the next month or two," said Cary Leahey, an economist at Deutsche Bank Securities.

When the Commerce Department reports Friday on first-quarter economic growth, it will say it expanded at a 2.3 percent annual rate, according to the median estimate of 62 economists in a Bloomberg News survey.

The buildup to war in Iraq and February snowstorms took a toll on manufacturing and consumer spending in the quarter, restraining growth in gross domestic product, economists said.

Now, with the demise of the Iraqi regime this month, oil prices have dropped and consumer confidence has increased, suggesting Americans may have the will and means to keep spending.

"The overall landscape of the economy looks much better than it did at the beginning of this year," said Economist Sung Won Sohn, of Wells Fargo & Co. in Minneapolis. "We are overcoming some negatives, including war anxieties, soaring oil costs and a plunge in consumer confidence."

Even though interest rates are at a 41-year low, some pessimists believe the Federal Reserve still hasn't done enough to pour money into an economy they see as smoldering.

Whether members of the central bank share that view will be more evident Wednesday, with the Fed's region-by-region beige book. It will help serve as an agenda for policy-makers when they gather May 6.

Chicago economist Carl Tannenbaum said the report, compiled from data taken several weeks ago, is likely to talk about the Iraq war serving as "a significant obstacle to all kinds of economic activity, both by corporations and individuals."

"The question for the Fed is whether some of the economy's deepest problems don't relate to the war," said Tannenbaum, of LaSalle Bank.

The big roadblock, he said, is that corporations are doing virtually no hiring. Some executives still feel compelled to undertake belt-tightening.

"At this point, it remains too close to call whether the Fed will make another reduction in interest rates," Tannenbaum said.

The Chicago Tribune and Bloomberg News contributed to this report.