Sluggish data sparks fresh debate on US economic outlook

A series of surprisingly weak reports has prompted fresh debate on whether the US economic expansion can continue through 2007 or succumb to a housing-led downturn.
Most economists see the economy muddling though at a sub-par growth pace, but soft data in recent weeks has sparked more talk about a recession instead of a so-called soft landing.
Raising concerns is an apparent spill-over from a weak housing market to other sectors of the economy, notably manufacturing. In this atmosphere, it remains unclear whether consumer spending - which represents the bulk of economic activity - can carry the economy through.
The latest warning signs came last week in a series of glum reports on durable goods orders, construction spending and surveys on the manufacturing sector of the economy.
Friday's Institute of Supply Management survey of manufacturing showed the first shrinkage in 41 months. The ISM index slipped to 49.5 percent in November, below the figure of 50 percent marking the point between expansion and contraction.
Orders for big-ticket manufactured durable goods fell 8.3 percent in October, while construction spending slipped one percent.
Federal Reserve chairman Ben Bernanke remained upbeat in a speech Tuesday, saying he believes the US economic expansion is likely to remain on track through 2007, weathering a slowdown largely confined to the housing sector.
The government revised up its estimate of third-quarter growth in gross domestic product (GDP) to 2.2 percent from 1.6 percent. But that covers the period from July to September.
Now, many private economists are marking down their forecasts for the fourth quarter and beyond. "Has the economy stalled? We think so," wrote economists Joseph LaVorgna and Carl Riccadonna of Deutsche Bank.
"In light of continued weakness in the economic data, we are cutting our fourth-quarter real GDP growth forecast to zero from the 1.0 percent that we were originally predicting. "This is largely due to weakness in durable goods shipments and orders, but also due to weak consumer spending."
Princeton University economist Paul Krugman wrote in the New York Times that he sees "economic storm signals" ahead.