When an economy moves sideways, it is characterized by conflicting data. One sign of inflation points up, another points down; an employment indicator goes up, another goes down. Much like situations involving conflict where it seems that the only people who make money are the lawyers, these types of economic situations are when experts make their money. The proof that we know so little about the economy is that so much is written about it.

Last week's advance release of Q1-2005 GDP illustrates this point. Coming in at 3.1%, experts were disappointed that it did not reach the consensus of 3.4%. I often wonder why they're never disappointed with their inability to forecast! This figure will be revised two more times. Through the last year or so, the advance GDP estimate has always been revised up. I know that the economy has been slowing, as it always does after a period of strong growth, but it’s still growing, and it is outperforming most other established economies, often by a very wide margin.

When you look under the hood, the GDP report was actually strong; the weakness was that net imports were high. Pessimists always look at imports as bad, and that's easy to understand as a first reaction. But imports are a sign that demand is still strong and that the economy is still moving. Nearly every recent economic surge has been preceded by an increase in imports. The problem is that exports are not growing like they typically do. Last week France's unemployment hit its highest point in about five years. Germany's GDP is still struggling to stay around 1% growth and often failing in that quest. Comparatively high unemployment is rampant in Europe, except in the UK and Ireland, countries that are often hiring workers from the European mainland. How long the European economies can persist in their sluggishness is an issue of political will, needing a move in favor of deregulation and entrepreneurism on the part of the European Union, and some loosening of the money supply (the paralysis caused by fear of inflation is often worse than inflation itself). Unless the Asian economies start heating up, you'll have to put up with experts claiming that the U.S. economy is really slow.