Tags: economy | recovery | data | Fed

Experts: Sputtering Economy 'More Challenging Than We Had Planned'

Tuesday, 23 Jul 2013 08:04 AM

By Dan Weil

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The economy continues to fall short of a robust recovery, as confirmed by recent economic and corporate earnings data.

Economists surveyed by The Wall Street Journal now forecast gross domestic product (GDP) grew just 1.5 percent in the second quarter, and some predict an expansion of less than 1 percent. The economy grew 1.8 percent in the first quarter.

To be sure, the economists expect growth of 2.4 percent for the third quarter and 2.7 percent for the fourth, but optimistic projections have frequently been proven wrong during the past few years.

Editor's Note:
The Final Turning Predicted for America. See Proof.

Worry runs high about the consumer sector, which accounts for about 70 percent of GDP. Retail sales gained a lower-than-expected 0.4 percent in June.

"This year is proving to be more challenging than we had originally planned," Howard Levine, CEO of discount retailer Family Dollar Stores, told investors earlier this month, The Journal reports. "The consumer is just more challenged than we had anticipated."

Weak economies overseas are putting a damper on exports. The U.S. trade deficit widened to $45 billion in May from $40.1 billion in April.

However, not everyone says it's the numbers that are bad, but rather the estimates that are bad.

"I don't see these numbers as being surprisingly lousy," said Tara Sinclair, a George Washington University economist. "I would rather say that the forecasts we saw earlier were overly optimistic."

"While I think the third quarter will be better than the second, I'm nervous about the fourth," Ian Shepherdson, chief economist of the research firm Pantheon Macroeconomics, told The Journal.

Meanwhile, second-quarter earnings results have been disappointing for many companies, including McDonald's and technology stalwarts Google, Microsoft and Intel.

Ironically, the economy's sluggishness may help stocks — by keeping the Federal Reserve from tapering its quantitative easing too soon, some experts say.

"There was concern that the economy may be doing a little better than the Fed was estimating and that might lead to an earlier tapering," John Carey, a fund manager at Pioneer Investment Management, told Bloomberg.

"Now with fairly modest economic growth and slow earnings growth, I don't think people are going to be as worried about the tapering."

Editor's Note: The Final Turning Predicted for America. See Proof.

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