Economy: Cooling or Robust? (Editorial)

A survey of 50 economic forecasters by the National Association of Business Economists sees the U.S. economy cooling down to a 2.6 percent annualized growth rate in the second half of the year.

The slowing economy comes as consumers have cut spending because of higher energy prices and borrowing costs.

While the NABE says the economy is slowing a bit, it isn’t moving toward recession.

The NABE projections are weaker than previous forecasts that called for the economy to expand at a 3.1 percent pace in the third quarter and then a 3 percent pace in the fourth quarter. A strong first quarter, however, will give a growth rate of 3.3 percent by the end of the year, NABE said — which is about like last year.

Meanwhile, William Poole, president of the Federal Reserve Bank of St. Louis, called the economy “robust” since business construction is picking up even as the housing market slows. “The economy is really not fragile — it’s robust,” Poole said in early September.

Poole appeared more worried about inflation, while the NABE survey showed that nearly half were concerned that high energy costs could pose a risk to continued economic expansion. The survey also showed that nearly a quarter saw rising interest rates as a risk and 20 percent listed declining home prices as the biggest risk.

The good news is that despite the responses from the dismal scientists, “economic expansion is not expected to end anytime soon.”

Poole told the economists that the commercial business expansion plans means that business is confident about the future. “You don’t start those projects if you think the economy is going to tank next year.”

All in all, not a bad report.