When the Commerce Department releases its first-blush economic growth estimates for the second quarter of 2013 on Wednesday, it’ll likely show a U.S. economic recovery lumbering along at an anemic pace.
Most mainstream economic forecasters expect a growth rate from April to June well below 2 percent, with the most optimistic in the 1.5 percent range and the more pessimistic in the range of 0.5 percent.
In normal times, this slow growth would trigger fears that the U.S. economy, the world’s largest, is slipping back into recession.
But these aren’t normal times, and the overall number over much of the last year has been bifurcated. When measured alone, private-sector growth has outperformed the broader economic growth number. That’s being dragged down by reduced government and defense spending.
It’s why President Barack Obama has given four speeches in the past week talking up the economy.
“This year, we’re off to our best private-sector jobs growth since 1999,” he said Tuesday in Chattanooga, Tenn. “We now sell more products made in America to the rest of the world than ever before.”
Several measures of business activity, ranging from retail and car sales to consumer sentiment and housing, have been healthy of late, and even hiring is picking up. But growth remains subdued.
“This has been an unusual period – to sustain growth below 2 percent without falling into another recession, this is very atypical,” said Gregory Miller, chief economist for Atlanta-based SunTrust Banks Inc.
Federal government spending and investment fell by 8.7 percent in the first three months of 2013, after falling 14.8 percent in the final three months of 2012. Defense spending fell 12 percent and 22.1 percent in those same periods.
The economy would be looking better if not for the sharp drop in government spending.
During the first three months of 2013, the economy was first reported to have grown at an annual rate of 2.5 percent, later revised down to 1.8 percent. During the final three months of 2012, the economy barely grew, posting a dismal rate of 0.4 percent. Over the prior six months for which data is available, the economy grew at about 1.1 percent.
And few economists expect better on Wednesday.
“Largely because of a weaker-than-expected reading on shipments for nondefense capital goods excluding aircraft for June, this week we shaved two-tenths from our estimate of second-quarter . . . growth, which stands at just 0.5 percent,” economists at forecaster Macroeconomic Advisers in St. Louis wrote late last week.
That’s about what’s expected by Mark Zandi, the widely followed chief economist for forecaster Moody’s Analytics, who also anticipates a slow quarter in the range of 0.5 percent.
Gus Faucher, senior macroeconomist for The PNC Financial Services Group in Pittsburgh, expects about 1.2 percent growth.
“That’s an economy,” he said, “that’s just bumping along.”
Housing is expected to help drive growth, as is consumer spending and a slight uptick in investment by businesses. But government spending is expected to keep dragging down an improving private-sector number.
“It’s kind of holding back the economy. We have been seeing this for a number of quarters,” said Faucher. “We’re likely to see that probably through the rest of the year. When you are going to do that, the private sector is going to have to carry the load, and it’s going to mean reduced overall growth.”