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Wednesday's Beige Book report and durable goods data brought more evidence of a weakening economy, and that's before taking into account the unknowable impact of the debt-ceiling impasse. Given the still weak jobs market and housing sector, economists are slashing growth forecasts and talk of a "double-dip" recession is resurfacing.
But fear not. This too shall pass, says Liz Ann Sonders, chief investment strategist at Charles Schwab.
The economy is experiencing a "soft patch", similar to what occurred last summer, although "clearly there are some other factors at play," Sonders says. "It's global. It's a slowdown but I think another full-blown recession is unlikely."
In addition to the debt-ceiling debate, those "other factors" include the spike in oil prices last spring, extreme weather and the loss of Japanese manufacturing following the devastating earthquake and Tsunami in March. Oil prices have since moderated, Japanese production is coming back on line and "I don't think economists have sufficiently added that back into numbers for the second half," she says. "Now you've got this debt ceiling crimp on confidence that hopefully will go away and then I think we get a lift."
To be sure (and clear), Sonders is not looking for a booming economy and says the deleveraging process will continue to weigh on growth for several years. Still, she predicts GDP growth will approach 3% in the second half of 2011 and that the current expansion will last "another couple of years."
Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @atask or email him at altask@yahoo.com


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