Thursday, April 12, 2007

Economic Worries Move Beyond Housing

A new survey out from the Wall Street Journal....

Weakness in business capital spending is edging out housing as the dark cloud on the U.S. economic horizon, the latest survey of forecasters found.

When asked which factors pose the biggest risks to their forecasts for growth in the coming year, 35 of the 54 economists who answered the question marked weakness in business spending as the No. 1 or No. 2 risk -- with 20 naming it as their top worry. Weakness in the housing market was the main risk cited by 11 economists, while growing inflation was named by eight others.

"If there's something that keeps me up at night, it's the potential of corporate America really pulling back," said Nariman Behravesh at Global Insight. Amid signs the economy has lost steam, businesses have become more cautious in their spending. "We had expected 5%-6% growth in capital spending in the first half of 2007, but now that's down to 1.5%. It probably lowered our GDP forecast by three tenths of a percentage point," Mr. Behravesh said.
Indeed, in the latest survey, the average growth forecast for gross domestic product, the broadest measure of economic output, fell for each quarter this year. The economists, on average, now expect 2% growth in the first quarter and 2.2% in the second quarter, down from 2.3% and 2.4%, respectively, in a survey conducted in March. Economists see improvement in the second half, estimating 2.5% and 2.9% growth in the third and fourth quarters, respectively. Read on here.

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