US Economy

Despite mixed data, economy recovering: Economists

A tale of two economies

Despite mixed data released Monday, the U.S. economy is recovering, two economists said Monday.

The Institute for Supply Management (ISM)'s index of national factory activity was up in May and construction spending surged in June. While personal income increased in April, consumer spending for the month was unexpectedly flat.

Economists polled by Reuters had expected an increase of 0.2 percent in April's consumer spending, which accounts for more than two-thirds of economic activity.

However, Deutsche Bank chief U.S. economist Joe LaVorgna isn't concerned.

"We should continue to recover," he said in an interview with CNBC's "Power Lunch."

A worker on a building under construction in New York.
Don Emmert | AFP | Getty Images

While the economy contracted in the first quarter, it actually grew 3 percent year-over-year, he added, which is the best showing since 2006.

LaVorgna, also a CNBC contributor, expects gross domestic product for the second quarter to be about 2.5 percent.

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He also believes the consumer will start spending.

"Going forward … the strong income growth, combined with a very good job market should get a recovery in consumer spending at some point in the back half."

Jeffrey Cleveland, chief economist at Payden & Rygel Investment Management, said that while he is a little worried about the latest consumer spending numbers, he doesn't want to make much of the April data because it is backwards looking.

"I don't want investors to look at April personal spending data and then make huge extrapolations about what's going on in the U.S. economy. We think things are fine," he said.

He also doesn't think an interest rate hike by the Federal Reserve will derail the recovery.

"Those that think that a 25 basis point increase is going to pull the carpet out from under, I think, are wrong," Cleveland said. "It's a $17 trillion economy. It can withstand that."

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In fact, he said he welcomes the rate increase.

"If we get it over with, I think people will see the economy is fine and then we can move on to other things," he said.

As to when that first hike will come, LaVorgna still thinks it will come in September, although it may be a "close call."

"This is a nervous Fed. They're worried about everything."

—Reuters contributed to this report.