Despite the recent run of disappointing economic data, a broad range of experts and forecasters expect the economy to improve slightly in coming months, thanks to lower oil prices and new signs of life from sectors like automobile sand housing.
Call it a firming up, if not quite a comeback.
Economists at many of the most-watched forecasting organizations, both public and private, expect growth to pick up through the summer and into the fall, although only to a pace broadly considered sluggish, if not dismal.
This week, Macroeconomic Advisers, an economic consultancy often cited by policy makers, estimated the annual rate of growth in the second quarter at just 1.2 percent — well below the pace needed to reduce the unemployment rate. But the firm also projected growth to accelerate to around 2.4 percent in the third quarter.
“The pace of economic growth is picking up, but not to a rate that is very robust,” said Joel Prakken, the chairman of Macroeconomic Advisers. “It certainly is no great shakes.”
Forecasters, including those at the Federal Reserve, have been overly optimistic at several points during the slump of the last few years, of course. But the recent fall in oil prices and the stabilization of the housing market do give some gravitas to the current predictions.
On Thursday, the Labor Department reported that new claims for jobless benefits dropped to their lowest level in four years, at 350,000 a week. Analysts said they were unsure how much of the decline stemmed from an actual improvement, as opposed to temporary factors in the auto industry.
The pace of economic growth will have huge implications for a country still trying to emerge from the worst downturn in 70 years amid a presidential campaign that will most likely turn on the economy.
“The soft patch could easily extend through year-end or almost a full year,” Steven Ricchiuto, the chief economist at Mizuho Securities USA, wrote in a note to clients on Thursday. “Companies are unlikely to hire, invest in new plants and equipment or build inventory. This pullback could very well last through year-end as the chances of any movement on the fiscal front are unlikely until after the election.”
The weaker-than-expected spring data has raised speculation that the Federal Reserve might announce a new round of bond buying this summer to spur growth. Some Fed officials want further action because they are not confident the economy will pick up soon.
But other headwinds have started to slack, leading some economists to believe that jobs and growth numbers will track up modestly.
Perhaps most significant is the falling price of oil. Gas prices rose steadily from January through March on concerns over a confrontation with Iran as the United States and its allies cut the producer out of the petroleum market. But tensions have faded and gas prices have fallen to $3.38 a gallon today from above $3.90 a gallon in April, which has left more money in American consumers’ wallets and businesses’ ledgers. Every penny that the price of gas falls leaves about a billion dollars in American pockets over the course of a year, economists estimate.