As the unstoppable U.S economy heads into the 111th month of its stunning expansion, economists are starting to believe that strong growth could continue through the end of the year, despite the efforts of

Federal Reserve

policymakers to slow down the boom. The latest sign of strength: Solid first-quarter corporate earnings reports that helped pull the markets out of their tailspin this week.

There are some signs that growth will moderate in the second quarter and second half of 2000, especially if the important housing sector and consumer confidence continue to back off from their highs. Those pullbacks are the result of several interest-rate increases by the

Federal Reserve, but the broader economy has been largely immune to higher rates so far. In fact, based on recent growth data, some economists have raised earlier projections for

GDP growth in 2000.

One of the biggest wild cards for the economy will be the stock market itself, which has helped turbocharge economic growth through the "wealth effect." Consumers, rich on paper with stock market gains, have been confidently spending money on goods and services faster than U.S. producers can supply, causing fears of inflation.

But a broad and lasting pullback in the stock market would dampen consumer spending and cause an economic slowdown. "A widespread decline in the stock markets would probably filter through the economy, as a slowing agent, much faster than higher interest rates have," said Anthony Crescenzi, market strategist at

Miller Tabak Hirsch

Likewise, if the stock market heads higher, consumers will likely continue shrugging off higher interest rates.

Thus far, however, strong consumer spending, a rebounding stock market, a pickup in overseas markets and a roaring manufacturing sector promise to help push economic growth at an accelerated rate through the end of the year.

The economy grew at an astounding 7.3% annualized pace in fourth-quarter 1999 and looks poised to have grown at a 6% pace in the first quarter, according to many economists.

"Economic momentum this year is far stronger than anyone could have anticipated last year," said Dr. Sung Won Sohn, chief economist at

Wells Fargo Bank

. "There's a sense that people have been underestimating the economy, and that could be the case again."

Sohn expects that the nation's gross domestic product will likely slow to a 4% annual pace in the second quarter and to 3.2% in the second half. That forecast is in line with a feeling among many economists that second-quarter annualized GDP will fall to the 4% to 4.5% range and creep lower in the second half to the 3% to 3.5% range.

A bulk of the slowdown is likely to come in the housing market, which has already slowed somewhat in reaction to higher mortgage rates. For example, the

Commerce Department

recently reported that housing starts fell 11.2% in March, the largest drop in six years, to an annual rate of 1.60 million.

Housing aside, the overall economy has thus far thumbed its nose at the Federal Reserve's attempts to bring relentless growth to a more comfortable level. In a speech last week, Laurence Meyer, a Fed governor, said the central bank's efforts have so far had "nearly zero" success in slowing the economy.

But Meyer also reiterated the Fed's mantra that there is still a big risk of the economy overheating because demand continues to grossly outpace supply.

The Fed has raised rates five times in quarter-percentage-point increments since last June, bringing the overnight lending rate to 6% in an attempt to ease the strong economic growth -- for fear that it will eventually push wages and inflation higher.

Another risk of inflation comes from the steady growth seen in various overseas markets. When a large number of Asian and Latin American economies were depressed and their currencies weakened, the U.S. was able to import goods cheaply. But as those countries start to import more U.S. goods and as better returns in their markets provide competition for U.S. investments, the U.S. might not be able to finance its bulging trade deficit, which would lead to a weaker dollar and higher prices for goods and services.

"The Fed has been patient so far because inflation has not moved meaningfully higher, but if we start to see a continuation of what we saw in March, the Fed might need to make more of a statement," Sohn said. "Many of the factors that have kept inflation muted, especially the weakness in overseas economies, are simply not there anymore."

However inflation creeps into the economy, it remains the arch nemesis of the Fed and financial markets. If it continues to tick higher, the Fed may step up its defensive efforts, which could come in the form of interest-rate increases of half a percentage point or raising rates unexpectedly in between the Fed policymakers' scheduled meetings.

But even if the central bank pounds its fists harder on the table, there are some indications that the economy could continue to run on pure momentum. Though technology stocks have faltered in recent weeks, broad measures of the stock market are still very healthy and have been helped by a slew of strong corporate earnings. Tight labor markets have also begun to push wages higher, and though consumer confidence has been dented in recent months, it remains near historical highs.

"We are going to see some degree of slowdown in interest rate-sensitive activity in the second quarter as higher rates take a bite out of residential investment and business expansion," said Joe LaVorgna, senior U.S. economist at

Deutsche Bank

. "However, the risk is clearly that second-quarter growth will continue to run well above trend based on its already-broad strength and the potential that stock markets and rising wages will continue to support a wealth effect."

LaVorgna expects the economy to grow about 4% in the second quarter and about 3.5% to 3.6% in the second half of the year. That's a rate that might make

Alan Greenspan

sleep more easily.