(Bloomberg) — Economists expect U.S. consumer spending, the biggest part of the economy, to pick up in the second quarter by more than previously estimated — though they’re still projecting that the economic expansion will decelerate to the weakest pace in two years.
Consumer spending will climb at a 3.4% annualized pace in the April through June period, according to a July 5-11 survey of 53 economists by Bloomberg News. That compares with a 2.7% rate seen in last month’s survey and a 0.9% reading in first-quarter data.
“We’ve moved from solid growth to strong growth in consumer spending,” said Leslie Preston, a senior economist at Toronto-Dominion Bank. She raised her second-quarter spending forecast to 3.6% growth from 2.5% a month earlier on recent strength in retail sales as well as personal income and spending.
Despite the projected rebound in purchases, gross domestic product is still forecast to slow to a 1.8% annualized pace, unchanged from the prior survey. The Commerce Department’s advance estimate for second-quarter GDP is due for release July 26. First quarter growth was 3.1%.
“It’s the hangover to what was happening in the first quarter,” said Chris Low, chief economist at FTN Financial. He expects second-quarter GDP growth of 1.6% on weakness in business investment and inventories.
Spending in the first quarter was revised down to the slowest pace of growth in a year but a substantial boost from trade and inventories helped boost GDP. Still, inventories are shrinking and the latest trade deficit data signal net exports will be a drag on second-quarter growth.
Beyond those growth expectations, recession expectations are creeping up. Some 31% of economists expect a recession in the next 12 months, versus 30% in the last survey and 15% a year earlier.