In Latest Data on Economy, Experts See Signs of Pickup
Despite the recent run of disappointing economic data, a broad range of experts and forecasters expect the economy to improve slightly in coming months, thanks to lower oil prices and new signs of life from sectors like automobiles and housing.
Call it a firming up, if not quite a comeback.
Economists at many of the most-watched forecasting organizations, both public and private, expect growth to pick up through the summer and into the fall, although only to a pace broadly considered sluggish, if not dismal.
This week, Macroeconomic Advisers, an economic consultancy often cited by policy makers, estimated the annual rate of growth in the second quarter at just 1.2 percent — well below the pace needed to reduce the unemployment rate. But the firm also projected growth to accelerate to around 2.4 percent in the third quarter.
“The pace of economic growth is picking up, but not to a rate that is very robust,” said Joel Prakken, the chairman of Macroeconomic Advisers. “It certainly is no great shakes.”
Forecasters, including those at the Federal Reserve, have been overly optimistic at several points during the slump of the last few years, of course. But the recent fall in oil prices and the stabilization of the housing market do give some gravitas to the current predictions.
On Thursday, the Labor Department reported that newclaims for jobless benefits dropped to their lowest level in four years, at 350,000 a week. Analysts said they were unsure how much of the decline stemmed from an actual improvement, as opposed to temporary factors in the auto industry.
The pace of economic growth will have huge implications for a country still trying to emerge from the worst downturn in 70 years amid a presidential campaign that will most likely turn on the economy.
United States growth began to surge in late 2011 and early 2012, before slowing significantly in the spring. Some of the recent headwinds — like a re-escalation of the euro zone crisis, households that are paying down their debt, and a falloff in growth in big emerging markets, like China and Brazil — remain.
With tax increases and across-the-board government budget cuts looming at the end of the year — unless Congress acts to change the law — some economic experts are wary.
“The soft patch could easily extend through year-end or almost a full year,” Steven Ricchiuto, the chief economist at Mizuho Securities USA, wrote in a note to clients on Thursday. “Companies are unlikely to hire, invest in new plants and equipment or build inventory. This pullback could very well last through year-end as the chances of any movement on the fiscal front are unlikely until after the election.”
The weaker-than-expected spring data has raised speculation that the Federal Reserve might announce a new round of bond buying this summer to spur growth. Some Fed officials want further action because they are not confident the economy will pick up soon.
But other headwinds have started to slack, leading some economists to believe that jobs and growth numbers will track up modestly.
Perhaps most significant is the falling price of oil. Gas prices rose steadily from January through March on concerns over a confrontation with Iran as the United States and its allies cut the producer out of the petroleum market.
But tensions have faded and gas prices have fallen to $3.38 a gallon today from above $3.90 a gallon in April, which has left more money in American consumers’ wallets and businesses’ ledgers. Every penny that the price of gas falls leaves about a billion dollars in American pockets over the course of a year, economists estimate.
The lower gas prices “will take a few months to show up” in consumer spending and confidence numbers, said Mr. Prakken of Macroeconomic Advisers. But it should lead to higher sales for businesses and greater optimism among households.
James Bullard, the president of the Federal Reserve Bank of St. Louis, said that he saw “modestly improving economic growth during the second half of 2012, along with a slow and intermittent decline in unemployment,” when he spoke in London last week.
Economists pointed to surging new car sales as a good economic indicator: a sign that households are confident enough to make a major purchase and that they are accessing the credit markets.
It is also a boon for auto businesses — the auto industry reported a 22 percent jump in sales in June, with some carmakers reporting that revenue increased as much as 60 percent year-on-year.
“The surge in car sales is disproportionately important,” said Ian Shepherdson, an economist and forecaster at High Frequency Economics. “It means that you’re willing and able to take out a loan — and that’s quite a good sign.”
Moreover, there are accumulating signs that housing has turned around, perhaps auguring a rise in residential investment, an upturn in construction jobs and growing sales.
“I do think that the economy is stronger than the recent data would suggest,” said Mark M. Zandi, the chief economist of Moody’s Analytics. “We’ve had the numbers say underlying job growth is at 80,000 jobs a month, where we could see 150,000 jobs a month. Or G.D.P. at 2 percent, where it’s really at 2.5 percent. That will become evident later in the year.”
Some economists pointed to private forecasts showing a stronger June than the one depicted in government reports. A Bureau of Labor Statistics survey showed that employers added just 80,000 new positions that month — not enough to bring the unemployment rate down from its elevated rate of 8.2 percent.
But a closely watched monthly survey showed that private sector employers added a strong 176,000 jobs in June.
“Everybody has argued that A.D.P. got it wrong,” said Mr. Shepherdson, of the survey. “But it’s a big survey, and a good survey. Maybe the Bureau of Labor Statistics got it wrong.”
Mr. Prakken said the initial unemployment claims “suggest that the labor market has not fallen out of bed.” He added, “There’s been a pause in hiring, a momentary pause in hiring.”