The shock of federal spending cuts that hit this quarter is likely to fade, setting the stage for a stronger economy in the second half of the year, economists said in a Reuters survey. The annualized growth rate is projected to reach 2.2% in Q3 and continue to improve. Meanwhile, state governments are beginning to rebound from the recession, but challenges are likely to slow recovery, according to the Fiscal Survey of States, prepared by the National Association of State Budget Officers and the National Governors Association.

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