Cautious consumers, retrenching manufacturers and scant signs of inflation are diminishing optimism about a breakout in economic growth in the final stretch of the year.
Retail sales declined last month for the first time since March and manufacturing production slipped, government data released Thursday showed. Meanwhile, prices businesses receive for their goods and services were unchanged last month, a sign of still-soft demand at home and abroad. Companies also remain cautious about building up too much inventory, new figures showed.
Recent economic gauges, including evidence of a slowdown in August hiring, suggest the economy could be constrained for the rest of the year to a growth rate only slightly above the expansion’s overall 2% pace—the weakest of any since World War II.
Forecasters long expected an acceleration in the economy starting in the summer after nine months of economic growth around a 1% rate. The uptick was expected to deliver firmer wage growth and price gains, and put Federal Reserve policy makers in a position to lift the central bank’s benchmark interest rate by this month.
“Consumer spending growth is steady, but not spectacular,” said HSBC Securities economist Ryan Wang. When combined with manufacturing weakness and slower labor-market improvement, overall economic growth in 2016 “will come in a little lower than the average over the past five years.”
HSBC forecasts the economy to grow at a 2.5% rate in the second half of the year, and 1.8% for the full year. Barclays economists on Thursday lowered their third-quarter forecast for growth by 0.2 percentage point to a 2.6% pace. Macroeconomic Advisers reduced its third-quarter projection to a 3.2% gain from 3.4%.
With few signs of stronger momentum for consumer spending, manufacturing output or hiring emerging in recent data, and still-soft inflation, Mr. Wang and many other economists expect the Fed to hold rates steady at next week’s policy meeting.
View Article