Economists see sluggish US growth in second half
WASHINGTON - CALL it the big fizzle. The hoped-for second-half economic rebound in the United States is looking lethargic, with the country straining under high energy prices and the fallout from the housing and credit debacles.
Forty-five per cent of economists at US businesses and industry associations forecast growth of less than 1 per cent in the second half, according to a survey by the National Association for Business Economics (Nabe). And 10 per cent think economic activity could actually contract during the period.
‘Forecasters are approaching the second half with a lot of caution,’ Mr Ken Simonson, the point person on the survey and chief economist for the Associated General Contractors of America, said in an interview. ‘Most forecasters are suggesting the outlook will be sluggish but not desperate. I’m afraid we’re stuck on the ground floor of growth.’
Thirty-two per cent, meanwhile, think growth during the second half could be between 1 per cent and 2 per cent, which would mark a plodding performance.
The more bullish are clearly in the minority camp: 11 per cent think growth will come in between 2 per cent and 3 per cent. Only 1 per cent expect growth to surpass 3 per cent.
The US economy’s growth slowed sharply in the final quarter of last year and remained stuck in a rut in the first quarter of this year.
Earlier this year, many thought the first half of the year would be difficult and the second half would be stronger, lifted by the US government’s US$168 billion (S$228.5 billion) stimulus package, including tax rebates for people and tax breaks for businesses. With the rebates kicking in earlier than some expected, the second half could turn sluggish.
Many have ‘abandoned the notion of seeing a rebound’, Mr Simonson said.
Not only is the US slogging through lethargic growth, but it is also confronted by rising prices that threaten to spread inflation.
In the Nabe survey, 75 per cent reported paying more for raw materials such as fuel and steel. This is the highest percentage ever, according to records going back to 1994.
Those higher prices are squeezing profit margins and leading some companies - 35 per cent - to raise their prices, the survey found. This is up from 29 per cent in the previous survey in April.
At the bottom line, 30 per cent of respondents reported falling profit margins, nearly double the 17 per cent posting rising margins.
ASSOCIATED PRESS, AGENCE FRANCE-PRESSE
Source : Straits Times - 22 Jul 2008
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