Tyler Cowen asks

In the comments I also would like to hear Keynesian accounts, New or Old, of why gdp growth was suddenly 2.5%, not a great number for a recovery in absolute terms, but was it the predicted number or direction, given that the stimulus was finally exhausted?  I am comfortable citing “noise,” but does a liquidity trap model offer this same freedom?  Doesn’t the model itself imply that one margin is what matters and you are truly “trapped”?

The result was not surprising to me. Indeed, it came in a little low. Part of the strength was simply that a few service components that typically jump around all jumped together. However, a significant part was that autos, construction and government stopped dragging. This makes sense.

The marginal return to capital is rising as housing and transportation capital run thin. Rents and used car prices are both finally starting to rise as young consumers look for places to live and vehicles to drive. And, critically bank lending is available to support them.

In fact, I thought autos would be a positive contribution for PCE and I am still not convinced the revision won’t show them to be.

Government shrinkage looked about to run its course. State and local budgets run behind the business cycle. The next couple of months are when the bleeding should stop.