Further signs that the U.S. economy could be slowing to a crawl came Monday when the Commerce Department released figures showing that retail sales dipped a half percent in June to $401.5 billion, the third month in a row that sales have fallen.
It is the first time since 2008 that retail sales have gone down for three consecutive months. The report also revised lower the amount that Americans spent in April.
Part of the sales decline can be attributed to lower gasoline prices, but sales still fell 0.3 percent from May to June when gas stations are excluded from the tally.
On the bright side, sales were up 3.8 percent compared to June 2011.
The U.S. economy grew 1.9 percent in the first quarter, compared to 3 percent in the fourth quarter of 2011.
Among the biggest drags on the economy are the high unemployment rate, the recession and debt crisis in Europe that has consumers uneasy and dampens exports, and the sluggish housing market.
Some economists have downgraded their forecasts for the April-through-June period to below 1.9 percent.
Paul Ashworth, chief U.S. economist at Capital Economics, says economic growth likely slowed to an annual rate of 1.5 percent in the second quarter, according to the Associated Press
. It also said JP Morgan Chase economist Michael Feroli has lowered his estimate for the second quarter from 1.7 percent to 1.4 percent and that Chris Christopher Jr. of IHS Global Insight thinks growth for the previous three months was 1.3 percent. Feroli now predicts 1.5 percent growth in the third quarter.
Bank of America Merrill Lynch released a report in which it predicted the U.S. economy will slow to 1 percent in the second half of the year.
Federal Reserve Chairman Ben Bernanke gave a bearish outlook on the economy for the short-term during an appearance before a Senate committee on Tuesday. He warned Congress that the country could fall back into recession if lawmakers didn't reach agreement on the federal budget and overriding steep, automatic spending cuts that are due to trigger at the end of the year because of the debt ceiling impasse last year.
The uneven state of progress in the economy was underscored Tuesday by news that home builders are more confident about current and future new home sales. The National Association of Home Builders/Wells Fargo Housing Market Index rose six points to 35 points, the largest one-month gain recorded in nearly a decade and the highest level since March 2007. The NAHB said home buyers that were once casually shopping are now becoming serious about purchasing a new home because they think the market has bottomed out and want to take advantage of very low interest rates, giving hope that the housing market is beginning to turn the corner.
“Combined with the upward movement we’ve seen in other key housing indicators over the past six months, this report adds to the growing acknowledgement that housing – though still in a fragile stage of recovery – is returning to its more traditional role of leading the economy out of recession,” NAHB Chief Economist David Crowe said in a statement. “This is particularly encouraging at a time when other parts of the economy have begun to show softness, and is all the more reason that the challenges constraining housing’s recovery – namely overly tight lending conditions, poor appraisals and the flow of distressed properties onto the market – need to be resolved.”
The fortunes of freight railroads reflect how the broader economy is performing because they haul commodities and finished goods that are bought and sold across the country.
The volume of housing materials, such as lumber and roofing materials, at BNSF Railway is off 40 to 50 percent from its historic peak prior to the 2008 financial crisis, Chief Marketing Officer John Lanigan said last month in Washington at an event held by the Council of Supply Chain Management Professionals to discuss the health of the logistics industry.
Auto, intermodal and oil business has been strong, while coal shipments are down for the western carrier.
Intermodal primarily consists of consumer goods being transported from ports or domestic production sites to retail distribution centers.
Lanigan noted that despite strong growth in freight rail business during the past three years, BNSF will not get back to the peak car-loading level achieved in 2006 until next year or 2014. In 2006, BNSF moved 10.6 million shipments, or carload equivalents.
A return to the previous level by 2014 "would mean an eight year peak-to-peak recovery, which is longer than any recovery since the Great Depression," Lanigan said. - Eric Kulisch