Anxiety Mounts as US Economy Limps Into 2nd Half
A slew of weak U.S. economic data is casting doubts over expectations of a pick-up in growth in the second half of the year.
From manufacturing to job growth to consumer spending, the numbers have been grim, and economists are wondering whether they need to dial down forecasts for the remainder of the year.
"Our sense was that of a gradual improvement. Now the sense is of muddling along at a low level of activity," said Adolfo Laurenti, deputy chief economist at Mesirow Financial in Chicago. "We went from seeing progress, though gradual and very uneven, to not seeing progress at all."
Fading Auto Stimulus
Growth in the first half of the year was largely driven by automobile production and sales, which accounted for about 61 percent of the period's 1.9 percent increase in GDP.
Sales were boosted by pent-up demand after last year's earthquake and tsunami in Japan left U.S. showrooms bereft of popular models.
But economists say that demand now seems largely exhausted. They also point out that most of the purchases were by companies replacing their fleets. That suggests less support for the economy from autos in the future, particularly since much of the spending was funded from savings.
"Given the weak labor market, we are going to see consumers become a little cautious on vehicle purchases," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester Pennsylvania. "With gasoline prices coming off the boil, there is less of an urgency to go out and trade in gas-guzzlers for more efficient cars. Consumers are not going to shoulder the recovery, spending is not going lead overall growth."
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