Three temporary depressants. Three factors are weighing on first-quarter growth: 1) a consolidation in production; 2) paybacks from "bonus depreciation" and the first-time homebuyer tax credit; and 3) severe storms in much of the country that hobbled construction and employment. These factors likely will push annualized Q1 growth down to 2% or so, a full point lower than our estimate a month ago, and are casting doubt on the sustainability of recovery.

In our view, such fears are misplaced. Some of these factors are statistical, some are fundamental, but all are temporary. As a result, they do not change our view that the recovery is sustainable. And they will probably set the stage for a powerful, 4% spring snapback in the economy - one that could surprise with its force and for which markets are ill prepared.

Reviewing the case for sustainable growth. It's worth reviewing the four factors promoting sustainable growth through 2011: 1) Monetary policy has fostered improving financial conditions; 2) the impact of fiscal stimulus will last through 2011; 3) strong growth abroad will lift US exports and earnings; and 4) economic and financial excesses are abating. Most of these are playing out according to script. Markets are functioning, although demand for credit remains weak. Through refunds, tax credits should support consumer spending in the spring, and infrastructure outlays are only starting to show up. Exports are booming, earnings are beating expectations, and production is still catching up to final sales, while companies are reducing capacity and inventories. To be sure, headwinds to growth remain significant: Housing imbalances persist, and 2 million foreclosures are coming; job gains are still a forecast; and policy uncertainty clouds the outlook. The balance between those headwinds and tailwinds has kept our forecast for real growth in 2010 at 3¼% (Q4/Q4) for more than a year.

David Fuller's view Overall, this makes sense to me. The housing imbalances, 2 million or so foreclosures and weak employment figures remain a concern but at least these are known knowns. They should also help to keep monetary policy accommodative.