Published: Sunday, 25 Oct 2009 | 10:40 PM ET

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The U.S. recession is probably over, but the debate over whether the government ought to do even more to bolster the recovery isn't.

After Friday's surprisingly weak reading on British gross domestic product -- which showed the economy still mired in recession even though most other advanced economies appear to have escaped -- this week's U.S. GDP report looms large.

Economists polled by Reuters think Thursday's data will show the United States not only resumed growing in the July-to-September quarter, but at a pace substantially above the pre-crisis trend rate of about 2.5 percent.

"The U.S. economy has emerged with gusto from the longest and most severe recession since World War Two," said Harm Bandholz, an economist with UniCredit in New York.

Bandholz thinks the economy expanded at a 3.75 percent rate, which puts him a tad above the 3.2 percent consensus in the Reuters poll. He expects the current, fourth quarter to look almost as strong, yet he has his doubts on whether this is sustainable.

A breakdown of what is driving the growth -- a 108 percent annualized jump in auto sales and a 15 percent increase in residential investment in the third quarter -- explains his skepticism. Auto sales benefited from the government's cash-for clunkers program that expired in August, and a government tax credit program for first-time homebuyers is due to end next months.

Some high-ranking policy makers share his concern about the pace of recovery. Lawrence Summers, who is one of President Barack Obama's closest economic advisers, and Federal Reserve Vice Chairman Donald Kohn have both recently predicted a slow recovery with stubbornly high unemployment.

But it will cost money for the government to prod faster growth, and the United States is already looking at its heaviest debt burden since World War Two.

In an interview with Reuters last week, Summers pointed out that there are trade-offs involved when considering policies such as enacting another stimulus package or extending the government's $8,000 tax credit for first-time home buyers because "resources are obviously limited."

"I'm not sure that Stimulus 2 is a helpful concept," Summers said, although he added the White House would strongly support other measures such as extending unemployment benefits and putting more money in the pocket of senior citizens facing flat pension payments because ultra-low inflation means there will be cost-of-living increases.

Too Little or Too much?
    
But what if governments haven't done enough yet?

Britain's surprisingly weak third-quarter showing has left some economists wondering whether the Bank of England will need to expand its 175 billion pound ($285 billion) asset-buying program to provide a bigger lift to the economy.

Much like the Federal Reserve, the Bank of England is buying up debt to keep credit flowing and boost the economy.

Howard Archer, chief UK and European economist at IHS Global Insight, called the third-quarter GDP figures "a real shocker and desperately disappointing," and said it reinforces the belief that the BoE won't raise interest rates until at least late-2010.

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Even in China, where third-quarter economic growth came in at a robust 8.9 percent clip and prompted some analysts to question whether the economy was at risk of overheating,      officials are wary of withdrawing supports too soon.

"If China now removes these policies too early all of our previous efforts will be wasted and we could even be dealt a setback," Chinese Premier Wen Jiabao said on Friday.

Eventually, private demand will have to replace government supports, but it is hard to find evidence that households and businesses are ready to take on that role.

Japanese September retail sales figures, scheduled for release on Tuesday, are likely to show a decline; euro zone consumer sentiment figures due Thursday are likely to remain weak; and a report coming Friday on U.S. income is expected to be flat, suggesting spending power is constrained.

That is part of the reason why Wells Fargo economists argue that this recovery will not be as robust as the one that followed the deep U.S. recession in the early 1980s.

"The growth mix is heavily weighted toward one-hit wonders like cash for clunkers and the first-time homebuyer tax credit," they wrote in a note to clients.

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