The US government revised its final figure for first-quarter economic growth to 1.9% Friday night, our time, up from its earlier estimate of 1.8%, but the improvement provided no joy to the markets.
Nor did a rise in durable goods orders of 1.9% in May, rebounding from the sharp fall in April.
The general consensus on Friday was that the growth and other data were too weak for comfort, especially with the deepening impasse over the debt reduction and ceiling talks in Washington, plus the uncertainty of what happens to demand when the Fed stops its easing on Thursday.
There remains a widespread belief that economic growth has slowed in the June quarter, and there are some important bits of data out this week (house prices, consumer sentiment, car sales, personal income and manufacturing activity) that will again test confidence, rather than confirm it as they would in more buoyant times.
US economists say that given the current high unemployment rate of 9.1% and the ever growing pool of long term unemployed, the US needs a growth rate of 3% and more for a number of successive quarters to halt the drift and renew momentum.
The US economy typically grows by around 3.6% annual during an economic expansion. The December quarter saw growth of 3.1% (annual).
On Wednesday, the US Fed cut its growth forecasts for this year and next and raised its unemployment and inflation estimates for the rest of this year as well as for 2012.
Many economists have been cutting their forecasts for growth in the second quarter and the rest of 2011.
CNNMoney says its latest survey found that top economists are forecasting growth of just 2.3% in the second quarter, which is down from estimates of 3% only a month earlier.
The third growth estimate issued on Friday reflected a bigger rise in private inventory investment, up $US 55.7 billion, against the earlier estimate of $US 52 billion as businesses spent more money restocking.
That added 1.3% to growth (and if those stocks are not sold, could depress growth in the second and third quarters).
Worryingly, the revision cut the estimated expansion in business investment to 2% from 3.4%, which was a significant cut.
And another slight negative was the cut in the rate of import growth to 5.1% from the earlier estimate of a more robust 7.5%.
More imports (in volume terms) are usually a sign of solid domestic demand.
And exports fell, but the big influence was the fall in government spending, with federal outlays dropping 8.1% and state and local spending down 4.2%.
That is not going to change in coming quarters, and will be a negative factor with the debt ceiling talks pressuring the Obama Administration for big spending cuts.
And US consumer spending grew at an unchanged 2.2%, compared with the stronger 4% increase in the fourth quarter.
Bank lending for consumers, small business and big business is also weak in the first and second quarters, home lending remains weak and consumers continue to cut their credit card outlays.
Up till May spending was strong on new cars, but it faded that month with the Japanese cuts. Car sales are forecast to be up 11% in June. The figures are out Friday in the US.
The US is all set up for one or two significant statistics to show a quick turnaround to see share prices rebound strongly, or a strong vote in Greece’s parliament tomorrow night.
But the uncertainty about the August 2 deadline for the debt ceiling is weighing on sentiment.
And before that is the big question for all markets: what happens when the Fed stops its quantitative easing on June 30 (Thursday night)?
No more punchbowl yes, but when does the hangover start and the bills start coming in?
