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As Q1 growth forecasts slide, hopes build for Q2

As the first quarter of 2015 winds down, the U.S. economy's performance is reminiscent of how things stood a year ago, when a harsh winter in parts of the country was among the factors pegged for disappointing growth.

"It borders on disappointing, domestically," Jim Russell, portfolio manager at Bahl and Gaynor, told CBS MoneyWatch. "The pattern in just the last few weeks of most numbers coming in short of expectations most of the time."

Recent downside surprises include softer industrial production, housing starts and durable goods reports, with the labor market continuing to be the consistently bright spot.

"The one series of numbers that seem to be coming in very strong is anything tied to employment," said Russell, who noted a modest increase in wage growth, which up until recently had been lacking.

The weaker data have economists cutting their forecasts for first-quarter growth.

"Estimates have been coming down. Most numbers that I've seen for the first quarter have also been reduced from the 3 percent range to 2 percent to 2.25 percent. Economic growth is coming in short of expectations," Russell said.

"We have been gradually adjusting our first-quarter GDP tracking estimate downward over the course of the quarter, an eerily similar pattern to that seen last year in Q1 amid similarly adverse winter weather," analysts at Goldman Sachs wrote in a note published Thursday.

The estimates are likely to be revised further in days ahead, with economic reports slated to be released including data on personal income, pending home sales and monthly employment numbers for March.

While growth in the first quarter is unlikely to be impressive, its composition prepares the economy for a decent bounce back in the second quarter, much like that seen in 2014, the Goldman analysts wrote, expressing a view Russell concurred with.

Gains in employment, along with low interest rates and less expensive energy costs, set the stage for improvements in the quarter ahead, Russell and other strategists believe.

And while an anticipated increase in consumer spending as a result of lower gasoline prices hasn't yet materialized, with Americans using the extra cash to pay down debt and add to savings, analysts expect the scenario to turn around.

"Assuming at least some of the boost anticipated for Q1 shows up in Q2, it raises some upside risk to our standing 3 percent forecast," said the Goldman analysts.

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