» U.S. Markets Weekly – June 27 – July 1, 2011 Decision Economics

U.S. Markets Weekly – June 27 – July 1, 2011

Posted July 1, 2011 by CLeahey

[private][private]There are at least two competing explanations for the growth slowdown we experienced in the first half of this year. First, the economy was hit by a sequence of negative shocks whose effects are likely to be temporary. Theses shocks would be the oil price spikes and the fallout from the Japan tsunami. As oil prices recede and Japanese manufacturing returns to full capacity this summer, U.S. economic growth should rebound in the second half of the year. The second explanation is that the economic recovery has lost momentum (if it ever had any). Home prices are falling and hurting household balance sheets. Banks are concerned about regulations and capital requirements. Government spending is turning restrictive. And Washington appears unable to formulate a plan for debt reduction. Economic data released this week offered support for the first view but do not preclude the second.

DE-USEW-7-1-11[/private][/private]