CNBC: Economists Trim Second-Quarter Growth Forecasts

Friday, 25 Jul 2014 03:36 PM

By Dan Weil

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In recent weeks, many analysts have predicted economic growth of 3 percent or more for the second through fourth quarters, after a 2.9 percent contraction in the first quarter.

But now economists are beginning to reduce their second-quarter forecasts, particularly in light of the 1 percent drop in core capital good shipments reported for June Friday, according to CNBC.com

Goldman Sachs economists shaved their second-quarter growth estimate to 3.0 percent from 3.1 percent, the news service reports. JPMorgan reduced its second-quarter prediction to 2.6 percent and Barclays to 2.8 percent.

Editor’s Note:
New Warning - Stocks on Verge of Major Collapse

The government will release its first snapshot of second-quarter GDP Wednesday. The economy contracted at a 2.9 percent rate in the first three months of the year, with business spending on equipment falling at a 2.8 percent rate.

Meanwhile, JPMorgan economists have cut their projection of real equipment spending growth to a 10 percent annual rate in the second quarter from 12.5 percent previously.

"The weakness late in the quarter implies a soft trajectory for capital spending heading into 3Q," JPMorgan's chief economist Michael Feroli wrote in a report obtained by CNBC.com. "The latest data do nothing to indicate that capital spending is about to shift into higher gear."

Other economists worry that business investment might not pick up much at all for the rest of the year. "The weakness late in the quarter implies a soft trajectory for capital spending heading into the third quarter," Michael Feroli, an economist at JPMorgan in New York, told Reuters.

Meanwhile, some experts say sluggish home sales will weigh down the economy. New home sales plunged 8.1 percent in June, putting the decline at 4.9 percent for the first half of the year.

"Housing has clearly been a notable area of persistent sluggishness beyond early-year weather disruptions," Ted Wieseman, an economist at Morgan Stanley, told The Wall Street Journal.

Paltry wage growth — 2 percent over the 12 months through June—is hampering home sales, said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa., and a member of the Newsmax Financial Braintrust Alliance.

"The labor market may be getting better, but wage gains are not. And until that happens, families will not be buying new homes at any great pace," he said.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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