August 9, 2022

Mixed Data Show Tepid U.S. Economy, but Leading Indicators Rising

But a separate report suggested that the rate of the recovery could soon pick up after stalling in the first half of the year.

Taking the unexpected soft patch into account, the International Monetary Fund cut its forecast for economic growth in the United States, warning Washington and debt-ridden European countries that they were “playing with fire” unless they took immediate steps to reduce their budget deficits.

While the I.M.F. thinks downside risks to growth have increased, it still expects the economy to gain speed next year.

Consumer sentiment in the United States declined more than expected in June, the Thomson Reuters/University of Michigan survey showed, as consumers remained pessimistic about stagnant incomes and job prospects.

“Job growth is, at best, anemic and the unemployment rate is high. If you’ve been laid off, it’s probably been for a long period of time,” said Cary Leahey, economist and managing director at Decision Economics in New York. “That can’t help but affect these sentiment figures.”

The preliminary reading showed the index at 71.8, down from 74.3 the month before. It was below the median forecast of 74.0 among economists polled by Reuters.

Although the data contained little evidence that a new downturn was under way, the survey found that most consumers believed the recession had not yet ended.

Consumers’ view of rising prices was also mixed as the survey’s one-year inflation expectation fell to its lowest since February, to 4.0 percent from 4.1 percent. But the five-to-10-year inflation outlook was at 3.0 percent, edging up from 2.9 percent.

A separate report showed that a gauge of future economic activity rose more than expected in May, but high gasoline prices and a weak housing market are expected to keep growth moderate.

The independent Conference Board said on Friday its Leading Economic Index increased 0.8 percent to a record high of 114.7, after a revised 0.4 percent fall in April. Economists had expected a rise of 0.2 percent.

The rise in the economic indicators was an encouraging sign after recent sluggish data, and underscored releases on Thursday that showed a better-than-expected picture of the labor and housing markets, but a contraction in Mid-Atlantic factory activity in June.

“This rebound in the leading indicators index is an encouraging sign that the recent slowdown in the economy may be short-lived,” Nicholas Tenev, an economist at Barclays Capital, wrote in a note.

In its report Friday, the I.M.F. forecast that the gross domestic product in the United States would grow a tepid 2.5 percent this year and 2.7 percent in 2012. In its forecast just two months ago, it had expected 2.8 percent growth in 2011, rising to 2.9 percent in 2012.

Article source: http://feeds.nytimes.com/click.phdo?i=fc534d1600128bf0e7de3e9131617809

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