Weak jobs, housing and consumer spending markets and the fading of government stimulus programs indicate slower U.S. economic growth during the second half of the year, said Nigel Gault, chief U.S. economist at IHS Global Insight.
“The economy entered the second half with plenty of momentum, and exited it with very little,” Gault said in a report Wednesday.
Gault expects second-quarter GDP growth to be 3.8 percent, mainly because of a strong start to the quarter, up from 2.7 percent in the first quarter. But IHS Global Insight lowered its third-quarter growth forecast to 2.3 percent from the 2.8 percent forecast last month.
Gault cited weakening growth in employment and consumer spending, the downturn in housing with the expiration of the homebuyers’ tax credit, and the fading of the boost from stimulus spending. “The evidence of slower growth is global,” the report said. “The inventory cycle is losing its force, so although manufacturing is still reporting growth, it’s slower than it was.”
“The evidence does not look so poor as to signal the dreaded ‘double-dip recession,’ but at a minimum it does signal slower growth in the second half of the year,” the report said.
The report said business spending on equipment and software is “a ray of light,” surging 11.4 percent in the second quarter and expected to rise 19.5 percent in the second quarter. “What’s more, the trend in capital goods orders is still pointing higher. Businesses are flush with cash, and are starting to address replacement needs neglected during the recession.”
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