Statistics batter hopes for fast return

WASHINGTON – Hopes for blue skies ahead for the U.S. economy are fading as forecasters are dialing back their annual growth projections after a spate of lukewarm readings on the performance of the U.S. economy and continuing global woes.

In recent weeks, there have been less than stellar data coming out of manufacturing, housing, car sales, consumer confidence and employment. These piled up on top of high prices for oil, gasoline and other commodities, debt troubles in Europe and cooling growth in Asia.

Taken together, it all points to half-speed economic growth ahead, below what’s needed to get the U.S. and global economies on firmer footing.

The flurry of dismal data sent stocks skidding Wednesday. The Dow Jones industrial average fell 2.22 percent, or 279.65 points, to 12,290.14. The S&P 500 fell 2.28 percent, or 30.65 points, to 1,314.55. The Nasdaq was down 2.33 percent, or 66.11 points, to 2,769.19.

The two latest poor data readings came Wednesday. The Institute for Supply Management released its manufacturing index, which showed a sharp slowdown, and the ADP National Employment Report, which showed surprisingly weak private-sector hiring.

The employment report comes ahead of Friday’s much-anticipated May jobs report from the Bureau of Labor Statistics. Analysts had expected 175,000 new jobs, but the ADP report showed private employers added just 38,000 jobs in May. That’s a possible harbinger for a weak BLS report after two consecutive months of strong numbers.

Also disappointing was the Institute for Supply Management’s report on manufacturing activity. The index continued to show growth, but “the data suggest a significant slowdown from what was likely an unsustainable pace,” said Cliff Waldman, an economist for the Manufacturers Alliance/MAPI.

May’s 7 percentage point drop on the index in a single month – fueled by an even larger 10 percentage point drop in the new orders component of the index – is troubling. In a statement, Waldman warned it could signal “sharper than expected moderation,” adding manufacturers no longer have the wind at their backs.

“At this point, however, elevated commodity prices, slowing global growth and an increasingly questionable outlook for the U.S. economy are creating headwinds for the factory sector, which thus far has been the one strong element in an otherwise sluggish U.S. economic rebound,” he said.

David Malpass, the president of the research company Encima Global, said hiccups in auto production are to blame, and downplayed worries.

“Even with the letdown, manufacturing is showing stronger employment readings than in the 1990s and 2000s expansions. We think manufacturing employment will show weakness in the May establishment survey on Friday, but will improve with auto production in the remainder of 2011,” he said in a research note.

The Conference Board’s monthly index of consumer sentiment fell sharply in May to 60.8 from 66 in April, the business-research group reported on Tuesday. Consumer spending often tracks closely with sentiment.

Macroeconomic Advisers has sharply revised down its projection for growth for the period between April and June – from a 3.5 percent annual rate down to around 2.7 percent. It hasn’t published a full-year growth revision but “that’s probably coming down as well,” economist Ben Herzon said.