(Reuters) – A host of weak economic data has led economists to hastily scale back forecasts for U.S. growth and increase expectations the world’s largest economy will fall back into recession, a Reuters poll found.
Economists cite persistently high unemployment, renewed weakness in the housing market and a slowdown in manufacturing for the pared growth expectations.
The median of forecasts from 50 economists polled by Reuters on Friday is for third quarter gross domestic product to grow at a 1.7 percent annualized rate, down from expectations of 2.4 percent in a similar poll just over two weeks ago.
“Without sustainable demand the recovery is subject to an uncomfortably high probability of stalling,” said Steven Ricchiuto, chief economist at Mizuho Securities in New York.
“The economy should be growing at a 5 percent to 6 percent pace, especially after policy makers have pumped more than two trillion (dollars) into the economy in the past year,” Ricchiuto said in a research note.
The poll was conducted on Friday after the U.S. government drastically cut its estimate of second-quarter growth, pegging gross domestic product in the second quarter at 1.6 percent, down from an original estimate of growth of 2.4 percent.
That compares with growth of 3.7 percent in the first quarter. For all of 2009, U.S. GDP fell by 2.6 percent.
While sluggish, the second quarter GDP level was still above economists’ estimates for a reading of 1.4 percent.
In the poll, the median of forecasts for the chances of a double-dip recession rose to 25 percent from 15 percent in a similar poll conducted in early July.
“The outlook for domestic demand, and overall GDP, in the third quarter has deteriorated sharply,” said Paul Ashworth, senior U.S. economist at Capital Economics in Toronto.
“A lot of the growth in the second quarter came at the start of the quarter, when employment and incomes were rising rapidly. Since then employment growth has tailed off and businesses appear to be having second thoughts about ramping up investment quite so rapidly,” Ashworth said.
Federal Reserve Chairman Ben Bernanke, in an address to an annual conference of global central bankers on Friday, said the economic recovery has weakened more than expected, adding the U.S. central bank is ready to take further steps if needed to spur slowing growth.
Some analysts expect to cut U.S. growth estimates even further.
“It is relatively likely that we will bring it down to maybe roughly 1.0 percent or so,” said Bernd Weidensteiner, analyst at Commerzbank in Frankfurt.
“The probability (of a double dip) has risen over the last couple of months and while we still see it below 50 percent, it is somewhat uncomfortably close to 50 percent.”
Commerzbank now sees third-quarter growth of 1.8 percent, and puts the chances of a double-dip recession at 35 percent.
SOURCE: REUTERS
