The American recovery appears to be petering out. Second-quarter GDP was revised down to an annualised 1%; the first estimate was 1.3%. Consumer spending ticked up in July, but confidence slumped in August. The Conference Board’s consumer confidence index fell from 59 to 44.5, the lowest figure since March 2009, when America was still in recession. House prices, according to the Case-Shiller index, were 5.9% down on a year ago in the second quarter.
What the commentators said
The US economy is “one giant soft patch” on the verge of recession, said David Rosenberg of Gluskin Sheff. A key worry is consumption, which accounts for around 70% of GDP. Shaky stockmarkets, high unemployment and energy prices, low income growth and large household debt loads militate against spending. The poor housing market outlook doesn’t help either. “There are just too many factors that will continue to drag house prices down,” said Patrick Newport of IHS Global Insight. “We still have a lot of foreclosures in the pipeline, a lot of excess supply, and demand for houses is continuing to weaken.”
Capital spending is still positive, according to Rosenberg. But this isn’t enough to offset factors such as lacklustre consumption and a fiscal squeeze. Even if growth doesn’t slip below zero, however, “it takes a while to work off debts”, as Hamish McRae put it in The Independent. Growth is likely to be tepid for years as America deals with the hangover from the burst debt bubble. As America is the world’s largest economy, “that puts a speed limit on global growth”.