Mixed Data Show Economy Growing at Weak Pace
ASSOCIATED PRESS | 7/14/2011, 5:43 p.m.
WASHINGTON -- A mixed slate of reports on July 14 showed the economy is being held back by high gas prices and sluggish hiring.
Economists are forecasting a pick-up in growth in the second half of the year. But the latest data revealed only faint signs of a turnaround.
The Commerce Department said retail sales ticked up only 0.1 percent last month, after declining the previous month. Consumers spent more on cars and in big chain stores in June, but less on furniture and appliances.
The number of people who applied for unemployment benefits dropped last week by 22,000 to a seasonally adjusted 405,000, the lowest level in three months. Still, applications have been above 400,000 for 14 straight weeks, reflecting the weak job market.
U.S. companies paid less for raw materials and factory goods in June, a separate report showed. The decline in wholesale prices was driven by the steepest fall in energy prices in nearly two years. Gas prices dropped by the most since last May, the Labor Department said.
Still, businesses and motorists are paying nearly a dollar more per gallon than they were a year ago. That has forced many consumers to forgo discretionary purchases. Growth in retail sales has slowed since February -- around the same time that gas prices began to surge.
"Consumers are fatigued," said Chris Christopher, an economist at IHS Global Insight. "The only real good news on the consumer side of the economy is that gasoline prices started to fall, but are still relatively high."
Stock markets rose in early trading but then gave up their gains. The Dow Jones industrial average fell 8 points in afternoon trading. Broader indexes also declined.
Another potential problem: businesses may be forced to cut orders in the coming months after adding to their stockpiles for 17 straight months. Sales across all levels of businesses fell in May for the first time in nearly a year, the Commerce Department said in a fourth report. Fewer sales are a sign that companies may have overestimated consumer demand.
JPMorgan economist Michael Feroli said the bank lowered its growth forecast for the July-September period based on the latest data on stockpiles. He said it expects only 2.5 percent growth, down from its initial estimate of 3 percent.
That's not much higher than the 2 percent growth most analysts expect for the first half of the year.
The economy would need to grow 5 percent for a whole year to bring down the unemployment rate by one percentage point. Economic growth of just 3 percent a year would hold the unemployment steady and keep up with population growth.
"Clearly the recent stalling in employment growth has forced households to be a bit more careful with their cash," said Paul Dales, senior U.S. economist with Capital Economics. "For the moment, these data will do little to dispel fears that the economic recovery is going nowhere."
Companies pulled back on hiring sharply this spring. The economy added only 18,000 net jobs in June, the second straight month of dismal hiring. The unemployment rate rose to 9.2 percent, the highest this year. That's far below the average job gains of 215,000 per month in the February-April period.