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U.S. economy still not firing on all cylinders

A GM plant in Texas.


Can the U.S. economy regain its stride in 2011?

That's the question preoccupying economists as they prepare for a flurry of data out this week. Recent numbers have proved disappointing, signalling that the pace of economic growth has slowed considerably.

Further dissatisfying statistics lie just ahead. This week will provide snapshots of all-important hiring activity as well as manufacturing vigour in May - and neither area is expected to improve on the previous month's performance.

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Instead, the figures are likely to be consistent with an economy that "lost further momentum in the second quarter," argued economists from Capital Economics on Friday.

The U.S. economy grew at an annual pace of just 1.8 per cent in the first quarter of this year, down from 3.1 per cent in the final quarter of 2010.

Some say the U.S. is experiencing a temporary soft patch in economic growth, not an enduring slowdown. This school of thought believes that the second half of the year will look better, as the impact of the earthquake in Japan and the rapid spike in oil prices moderates.

"A more upbeat picture may start to emerge in late June," noted economists at Goldman Sachs Group Inc. on Friday, pointing to positive underlying trends like a recovering job market. But they concluded on a cautionary note. "If the data flow fails to improve … we may need to consider a further downgrade to our U.S. growth forecasts."

The most important piece of data this week arrives on Friday, when the Labour Department provides the latest figures for job growth and the unemployment rate. In April, payrolls surged by 244,000, the third month in a row in which the economy added more than 200,000 jobs.

However, some economists are predicting that the streak ended in May, a victim of the broader downshifting in the economy. The result is likely to be a considerable drop in the number of people hired: both Capital Economics and Goldman are expecting a figure of around 150,000 for May, though other forecasts are somewhat more optimistic.

On Tuesday, economists and investors will get a look at the latest barometer of consumer confidence. While there could be some minor improvement in the figure, no one expects it to vault back to its recent high touched in February.

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Also arriving on Tuesday is the most closely followed measure of U.S. housing prices. The S&P/Case-Shiller index is expected to show that home prices continued to fall in March, although possibly at a slower pace than in recent months. If the slide in prices is indeed tapering off, that would be a welcome sign.




The week begins with a look at how the Canadian economy fared in March. The last reading, for February, showed the first decline in five months amid weak factory output. The GDP report, out at 8:30 a.m. ET, will offer at look at how manufacturers are faring with the dollar firmly above par, and the U.S. economy struggling to find traction.

U.S. markets are closed for Memorial Day.

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Companies reporting financial results include Bank of Nova Scotia.

U.S. economic indicators out today include S&P/Case-Shiller House Price Index, Chicago Purchasing Manager's Index and a look at U.S. consumer confidence.


Companies reporting financial results include Bombardier.

The ISM survey of U.S. manufacturers will provide a look at the health of U.S. factories.


Companies reporting financial results include ATS Automation and Laurentian Bank.

U.S. economic reports include non-farm productivity and factory orders.


U.S. employment numbers released today will show if the jobless rate is continuing to rise. In April, the unemployment rate rose to 9 per cent from 8.8 in March.

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About the Author
U.S. Correspondent

Joanna Slater is an award-winning foreign correspondent for The Globe based in the United States, where her focus is business and economic news and New York City.Her career includes reporting assignments in the U.S., Europe and Asia. In 2015, she was posted in Berlin, Germany, where she covered Europe’s refugee crisis. More

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