Friday, March 7, 2014
The Associated Press
WASHINGTON — The economy is expected to have grown at a dismal pace in the April-June quarter, weighed down by large tax increases and steep government spending cuts.
But the second quarter should be the low point for the year, economists say. The fiscal drag is expected to fade. At the same time, steady hiring, more business spending and a solid recovery in housing should push growth higher in the second half of the year.
Economists forecast that growth slowed in the April-June quarter to a seasonally adjusted annual rate of just 1 percent, according to a survey by FactSet. That's below the tepid rate of 1.8 percent in the January-March quarter.
The Commerce Department will release the first estimate of gross domestic product, or GDP, for the second quarter at 8:30 a.m. EDT Wednesday. GDP is the broadest measure of the output of goods and services, including everything from manicures to industrial machinery.
Most economists say growth is already starting to pick up. And many are predicting annual growth rates of between 2 percent and 3 percent in the third and fourth quarters.
There are threats to the better outlook. Unemployment is still high at 7.6 percent, limiting consumer spending. And budget fights in Washington could lead to a government shutdown this fall, potentially disrupting the economy.
Still, recent data have been encouraging.
"More and more of the economic tea leaves are pointing in the same direction -- toward a growth revival ahead," said Scott Anderson, chief economist at the Bank of the West.
Home construction, sales and prices have been growing since early last year. Americans purchased newly built homes in June at the fastest pace in five years.
Overall hiring has accelerated this year. Employers have added an average of 202,000 jobs a month from January through June. That's up from 180,000 in the previous six months.
Most economists blame tax increases and government spending cuts for the sluggish second quarter. Higher taxes slowed consumer spending. And government cuts subtracted nearly a full percentage point from growth at the start of the year.
Even so, the solid pace of hiring suggests the economy is doing better than the growth figures show. Tax receipts have been stronger. Faster growth in the second half of the year would help close those gaps.