America is the bright spot in the world economy?

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According to the second estimate of first quarter output, the American economy grew at a 1.9% annual pace in the first three months of 2012, down from 3.0% in the fourth quarter and less than the 2.2% growth initially estimated. A second measure of output—Gross Domestic Income—showed a somewhat better first quarter performance, growth of 2.7%, more in keeping with employment growth early in the year. But that’s not much comfort; the employment outlook continues to disappoint.

Demand growth is very anaemic. The labour-market recovery is clearly losing momentum. At the same time, inflation pressure is vanishing. And obviously, nervousness about Europe is impacting the risk premium in America. If the central bank doesn’t take new steps in June and the euro crisis continues at its current low simmer, it could be another disappointing summer for the American economy.

On the bright side, the housing sector is looking ever healthier, and conditions are more amenable to a domestic-demand led recovery than they’ve been in years.

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