Business

Economy barely moved in first half of 2011

WASHINGTON — Farewell and good riddance to 2011's first half — six months that are ending as sour for the economy as they began.

Most analysts say economic growth will perk up in the second half of the year. The reason is that the main causes of the slowdown — high oil prices and manufacturing delays because of the disaster in Japan — have started to fade.

"Some of the headwinds that caused us to slow are turning into tailwinds," said Mark Zandi, chief economist at Moody's Analytics.

For an economy barely inching ahead two years after the recession ended, the first half of 2011 can't end soon enough. Severe storms and rising gasoline prices held growth in January, February and March to a glacial annual rate of 1.9 percent.

The current quarter isn't shaping up much better. The average growth forecast of 38 top economists surveyed by The Associated Press is 2.3 percent.

The economy has to grow 3 percent a year just to hold the unemployment rate steady and keep up with population growth. And it has to average about 5 percent growth for a year to lower the unemployment rate by a full percentage point. It is 9.1 percent today.

As welcome as the stronger growth envisioned in the second half is, the improvement should be modest. For the final six months of the year, the AP economists forecast a growth rate of 3.2 percent.

So far this year, high gas and food prices have discouraged people from spending much on other things — furniture and appliances, dinners out or vacations. That spending fuels economic growth.

And some U.S. auto factories had to suspend or trim production after the March earthquake in Japan interrupted supplies of parts and electronics.

The latest dose of glum news: The government reported Monday that consumer spending was about the same in May as in April, the first time in a year that spending hasn't increased from the previous month.

Relief is in sight, economists say. Oil prices have fallen since Memorial Day. The drop has lowered the price of regular unleaded gasoline by 23 cents in the past month, to a national average of $3.57 a gallon, according to AAA.

The timing of the drop in gas prices is especially fortunate because they usually rise during summer driving season, says Robert DiClemente, chief U.S. economist at Citigroup.

And the kinks in the global manufacturing chain are starting to be smoothed out as the Japanese factories that make cars and electronics resume production.

The economists surveyed by AP predicted that unemployment will fall to 8.7 percent at year's end. It's not exactly the start of a boom: The economy is still carrying too much baggage from the financial crisis — damaged banks, depressed home prices, debt-burdened consumers — to achieve much liftoff.

Though some of the economy's weakness in the first half is temporary, "it is hard to see much on the horizon to cheer about," says Diane Swonk, chief economist at Mesirow Financial.

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