Business investment spending

Bill Dudley, the president of the New York Federal Reserve bank, indicated that he is most likely supporting additional action by the Federal Reserve to speed up the economy.

In remarks at an event in Syracuse, New York on Thursday morning, Dudley argued that "recent growth rates are barely keeping up with our potential."

"The incoming data on the U.S. economy generally has been a bit more upbeat over the past few months, "Dudley said. But it is "still too soon to conclude that we are out of the woods."

Some of the growth in sales and job creation in the first three months of the year may have been due to the mild winter pulling forward hiring and economic activity, Dudley said.

More from the speech:

 William C. Dudley, president of the Federal Reserve Bank of New York.

Regardless of the importance of the mild winter in distorting the recent economic data, 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 growth was stronger in the fourth quarter, most of it was due to inventory accumulation. Growth of final sales remained quite weak. Historically, quarters in which inventory investment makes significant growth contributions are typically followed by quarters 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, our current expectations are that real GDP will expand at around a 2 ¼ percent annual rate during the first quarter of 2012. Even with the robust increase of light vehicle sales, overall consumer spending in the first quarter appears to be rising at a similar moderate rate. At the same time, real disposable income has been flat over the past three months, and the large increase of gasoline prices is likely further sapping consumers’ real purchasing power. And growth of business investment spending, which softened in the fourth quarter of 2011, may have been even a little softer in the first quarter of this year.

To put the recent pace of growth into perspective, we believe that the economy’s long-run sustainable growth rate—what economists call the potential growth rate—is around a 2 ¼ percent annual rate. We need sustained growth above that rate to absorb the still substantial amount of unused productive capacity. Thus, our recent growth rates are barely keeping up with our potential.

Dudley is considered to be a "dove" on monetary policy, meaning he tends to support an easier policy than "hawks" worried about inflation.