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US economy to slow for rest of year, survey says

After expanding in the first quarter at the fastest pace in two years, the US economy will cool this quarter and show little pickup in growth in the second half of this year, according to the latest Blue Chip Economic Indicators survey.

The consensus forecast of 51 economists in the May survey projects that gross domestic product will expand at a 3.1 percent annual rate from April through June, down from the 5.8 percent growth pace in the first three months of the year. May's forecast for second-quarter growth is down from April's consensus of 3.4 percent and marks the first time since November that Blue Chip growth expectations have been revised lower.

About a quarter of those surveyed also cut expectations for the second half of the year. This month's survey forecasts that the economy will expand at a 3.3 percent annual pace in the third quarter, down from a consensus of 3.6 percent last month. Growth will pick up to a 3.6 percent pace from October through December.

"This month's retrenchment in forecasts of growth during the remainder of this year appears to stem from a reduction in optimism about the pace of recovery in capital spending, signs of a faster-than-expected widening in the trade deficit and growing signs of a pull-back in the pace of residential investment," the report said.

Even so, the outlook for the entire year improved based on the stronger-than-expected rebound in the first quarter. The economy will probably grow by 2.8 percent for the year, up from April's forecast of 2.6 percent growth, according to the consensus. The world's biggest economy expanded 1.2 percent lat year, damped by the recession that started in March.

Growth will probably accelerate to 3.5 percent next year, according to the consensus, slower than the 3.6 percent rate expected last month.

Concerns that business investment in new factories, equipment and software will be slow to pick up was the primary reason for the drop in expectations, the report showed.
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