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According to the conventional wisdom, the economy is set to bounce back from its winter-induced slump. It won't be the first time that the pundits got it wrong.
If this is a bounce back, I would hate to see what a decline looks like. For here we are, almost finished with the second quarter, and the economy doesn't look much different than it did in the first.
The real world is telling us a different story than the pundits think they see in their crystal balls. Rather than picking up, the economy is still plodding along, not necessarily declining — but not shifting into high gear either.
Take retail sales, for example. They represent one-third of the economy and two-thirds of total consumer spending. In May, they rose only 0.3% — less than half the 0.7% expected by the Street.
Even this was worse than it looked. Take autos out of the picture, and sales barely budged, rising 0.1% compared with the consensus forecast of 0.4%.
Housing is still in the basement. Builders' expectations may be bright, but they have yet to ramp up the pace of home building.
Rather than fall in the latest week as was thought, new claims for unemployment benefits rose. Employment is still weak, the long-term jobless rate remains at a postwar high, and would-be workers continue to leave the labor force, discouraged by the lack of job prospects.
The recent jump in oil prices will hurt buying power as it ripples through the pipeline to the ultimate consumers of gasoline, heating oil, fuel for industry, and, yes, prices of items that are made with oil, such as plastics. This comes as people are trying to cope with the rising cost of food and health care.
Because business has curbed its investments in new plants and equipment, technology innovation has slowed, and with it, productivity and the ability of the economy to grow.
Don't overlook the trade deficit. It reached $47 billion in April — a jump of $3 billion in one month. This also limits growth in the U.S., since we are purchasing goods made overseas instead of here.
After a lengthy run up, the stock market is beginning to wobble amid fears of overvaluation and seasonal weakness. What is also hurting equities are prospects for higher interest rates as the Federal Reserve continues to cut back its purchases of bonds.
Fiscal policy is frozen and promises to stay that way, thanks to the resurgence of the Tea Party. It also spells more government gridlock, difficulties is producing a budget, another possible deadlock when it comes to raising the debt ceiling to avoid a default, more cuts in federal spending and maybe even another shutdown.
Folks, this is not an environment conducive to 4% growth. Neither will it get us 3% growth. This feels more like growth with a 2% handle.
And this is for the second quarter. The rest of the year could be even lower.