The second quarter looks like it is off to a decent start, propelled by a pickup in confidence and a revival in consumer spending, economists said Friday.

BMO Nesbitt Burns Inc. chief economist Sherry Cooper said there are reasons for optimism despite the release of U.S. read GDP, which came in below consensus, rising at an annualized rate of only 1.6% vs 2.5% expected. Inflation was a bit firmer, with the featured domestic purchases price index up 3.6%. This was primarily due to the energy price spike.

“The most interesting weak spot was equipment spending, which had been rising, but fell 4.4% in Q1,” Cooper said. “Company cost-cutting programs must have stiffened, a trend we also see in high layoffs. The inventory and foreign trade numbers were softer than we were looking for as well.

“Before you get excited, final sales to domestic buyers remain safely in dullsville. There is no real sign of marked weakness in the trend, which showed 2.1% growth in the last year. The year-over-year trend illustrates that the Fed and helpful fiscal policy did the job in the post-bubble period. Final sales never went negative in the recession, keeping this cycle the mildest on record despite huge wealth losses.”

Cooper said BMO believes the economy was hit hard by energy prices, weather, and war uncertainties in Q1. “So, the GDP figures are only poor relative to hopes that recently were suggested by stronger monthly data.”

Ivana Rupcic, economist with the Royal Bank Financial Group, found little to be positive about in Friday’s GDP report.

“U.S. consumers are battling fatigue as their rate of spending begins to slow. Meanwhile, businesses have remained reluctant to take up the economic torch and whether this is related to the Iraq war or something more remains a critical question.”

But Rupcic said that with so much uncertainty clouding the economic horizon during the first quarter, the GDP figures do not come as too big a surprise.

“With much of the uncertainty related to the Iraq war now dissipating while some indicators (notably durable orders) looking better, the stage is being set for a better second half to the year.”