The rise is basically indistinguishable from having no growth at all and is far below the growth needed to get unemployment back to normal, according to the Commerce Department.
The department's latest estimate for economic output, released Thursday, showed that growth was depressed by declines in military spending (possibly in anticipation of the across-the-board spending cuts set to begin Friday) and the amount that companies restored their stockroom shelves.
"The good news with business inventories is that what they take away in one quarter they tend to add to the next," said Paul Ashworth, senior U.S. economist at Capital Economics, referring to the measure of this restocking process. "So there's a good chance that first-quarter numbers will be better than originally thought."
The output growth number was revised upward from the original estimate partly thanks to updated, and improved, data on business investment and net trade. Imports were lower than previously reported and exports were higher.
Economists expect that government spending will continue to drag on the economy this year, especially if Congress does not avert the spending cuts, which would shave around 0.6 percentage point off growth. Many are hoping that even if the cuts go through, Congress will reverse them in short order.
"They can always change their minds when they have to renew the continuing budget resolution at the end of this month or in April or May," said Ashworth. "My expectation is that at most the cuts stay a month or two, and in most departments, with a wink or a nod, they won't do anything crazy.'
Even if government does lop off $85 billion in the sequester, the private sector will offset most of this drag, thanks to the housing recovery and other sources of strength.