The second quarter’s slow growth was disappointing, but the U.S. economy will pick up in the third quarter and growth will accelerate into 2012, according to a Southern California economist.
“The second quarter losses will be replaced by third quarter gains,” Christopher Thornberg, a founding partner of Beacon Economics, told the Association of Pacific Ports conference Monday in Long Beach.
For the trade community, this means both imports and exports will increase in the second half of the year. Exports will lead the way and will outpace imports for the next five years, Thornberg said.
What many economists describe as a soft patch in the economy has probably bottomed out. For an economic shock to be severe, it must hit rapidly, go deep and be sustained, Thornberg said. However, energy prices have stabilized, flooding is over in the Midwest and Japan will move soon into a rebuilding phase after the devastating March 19 earthquake.
While positive about a short-term return to growth, Thornberg said he is concerned about the lingering U.S. trade deficit. In order to promote economic growth in the long term, imports must moderate and exports must accelerate.
Tax cuts have artificially propped up consumer spending, and that has kept imports higher than they should be, he said. China and other countries with export-oriented strategies have contributed to the U.S. import problem by suppressing the value of their currencies, he added.
The biggest risk facing the country is that the U.S. Congress may make the wrong choices, Thornberg said. In order to reduce the budget deficit and encourage growth, Congress will have to raise taxes and reduce government spending.
“Both are going to hurt, but it is better to have a bit of each medicine than all of one medicine,” he said.