U.S. Economic Outlook Weakens After Dismal Reports

Fears of an economic slowdown and bleak outlook were confirmed this week

Fears of an economic slowdown and bleak outlook were confirmed this week after latest economic reports showed a contraction in consumer spending and a bigger trade deficit.

Morgan Stanley analysts downgraded their third-quarter estimate of consumer spending after data revealed that retail sales were down than expected for July. The trade deficit jumped a record-high for June, and the U.S. economy grew a full percentage point than the government estimate of 2.4 percent.

Standard & Poor’s 500 index dipped 3.8 percent in the five days ended yesterday, marking a the largest one-week loss in one month, and an increase in Treasuries forced the yield on the benchmark 10-year note to its lowest level in 16 months amid fears that economy will fall back into a recession.

Data showing China’s slowing industrial production and imbalanced growth in Europe, added by the weak U.S. economic data, has made economists pessimistic about the prospects of the global economy.

“The data continued to show softening, and it does feel like the third quarter is starting off pretty weak,” said Bruce Kasman, economist at JPMorgan Chase & Co. “The bigger issue is whether the momentum slide we’ve seen since the second quarter will be arrested.”

The weak performance of the U.S. economy, reflected further by a 9.5 percent jobless rate and slow job generation, signals that President Barack Obama and the Democrats faces an uphill political battle to win the November elections and retain control of the U.S. Congress, said Democratic National Committee Chairman Tim Kaine during a Bloomberg Television interview this weekend.

Posted by James Fried on Sunday August 15 2010, 11:58 AM EST. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0