the second quarter, in part due to renewed concerns about financial fragility in the wake of the sovereign debt concerns in parts of europe. the recovery remained restrained, eventually prompting the federal reserve in november to embark on a second round of large - scale asset purchases, often called quantitative easing. second, a wide array of recent indicators suggest that the u. s. economy entered 2011 with substantial forward momentum. real personal consumption expenditure ( pce ) grew 4. 4 percent ( ar ) in 2010q4, led by spending on durable goods ( chart 9 ). the one - year, 2 percentage point payroll tax cut, part of the december 2010 tax package extending the bush - era tax cuts, is likely to give a significant boost to real pce over the first half of 2011, perhaps as much as $ 120 billion. bis central bankers ’ speeches real exports have grown rapidly of late ; growth has been strong among much of the emerging market world, and growth prospects among our major trading partners is promising ( chart 10 ). growth of business investment in equipment and software has been well maintained and is likely to get an added boost in 2011 from the “ full expensing ” provision enacted late last year as part of the tax package. this and the export strength is reflected in high levels of orders and shipments of capital goods ( chart 11 ). business investment in nonresidential structures, such as office buildings and hotels, hard hit by the recession, is still declining but at a much reduced rate ( chart 12 ). business inventories are in good balance with sales, after a very pronounced inventory cycle ( chart 13 ). reflecting these developments, measures of business activity in both manufacturing and nonmanufacturing have reached substantial highs and measures of consumer confidence have stabilized ( charts 14 – 15 ). third, substantial progress has been made on the large adjustment of financial positions in the household and financial institution sectors necessary after the substantial leveraging of households and financial institutions that occurred in the run - up to the financial crisis. confidence is increasing that conditions are now in place to support sustained abovepotential growth, when it occurs. aided by the second installment of large - scale asset purchases ( lsaps ), financial conditions have improved. after equity prices, interest rates and inflation expectations fell with the apparent slowing of the economic recovery in the summer, they began to move up again shortly after chairman bernanke ’ s speech laying out potential responses to the slowdown in late august in jackson hole

the next 5 - 10 years, it is a mixture of short - run and longer - run expectations, which may be related to its modest sensitivity to inflation. market - based measures include a time - varying risk premium that may explain the modest movements in that measure. 6 in contrast to longer - run expectations, short - run and, to a lesser extent, medium - run inflation expectations responded to the sharp rise in inflation. the lower portion of table 1 reports summary statistics for one - year - ahead inflation expectations from the michigan survey and one - and three - year - ahead expectations from the new york fed ’ s survey of consumer expectations ( sce ). consistent with past experience, one - year - ahead inflation expectations have been highly sensitive to incoming inflation during the recent period. the sensitivity of three - year - ahead inflation expectations is far less than that for one - year - ahead expectations. and they have been significantly less sensitive to incoming information during this period of high inflation than during the period before the pandemic. this suggests households view the run - up in inflation in 2021 as likely being less persistent than in prior episodes. 7 although the spf includes a longer - run forecast of pce price inflation, most other measures of inflation expectations do not exactly correspond to the pce price index that the fomc has stipulated for its long - run goal. this complicates a direct comparison of these measures to the fomc ’ s stated goal. for example, the sce refers to the “ rate of inflation, ” and the michigan survey refers to “ prices in general, ” rather than referring to a specific price index. similarly, “ breakeven inflation ” measures derived from inflation - indexed treasury securities are based on the cpi and include time - varying risk and term premiums in addition to expectations of inflation. 8 to address the lack of direct comparability of different measures of inflation expectations, i compare readings over the past two years to the levels observed during 2014 - 2020, after the fomc ’ s announcement of a 2 percent long - run goal and before the onset of rising inflation in the spring of 2021. the level of longer - run expectations in the spf has consistently stayed very close to the fomc ’ s 2 percent goal. the other measures have generally stayed within pre - pandemic ranges, with most recent readings only slightly higher than corresponding average levels from 2014 - 2020. the upper portion of table 1 provides statistics on these comparisons