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Quarter-End Insights

Outlook for the Economy

Special factors hit the economy hard in the first half, but there are fundamental concerns, too.

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  • The Japan disaster, high gas prices, and poor weather hampered the economy in the first half.
  • Inflation and real wage growth are key fundamental concerns affecting the consumer, which is the main driver of the economy. 
  • Consumers are still holding up reasonably well considering the headwinds they're facing.
  • Data may continue to be soft in the near term, but decent productivity growth, favorable demographics, and an eventual real estate recovery are positive longer-term drivers.

The economy clearly hit a soft spot in the second quarter as a wide range of indicators--including industrial production, retail sales, purchasing manager surveys, auto sales, and various housing metrics--all registered disappointing results.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.