Barry Ritholtz said it yesterday...
It is increasingly apparent from the many economic signals we have seen that business spending is fading, and is unlikely to replace consumer spending anytime soon. This is one of the reasons are recession expectations keep ticking higher, beyond 50%.
... and in an article dated tomorrow but posted online today, the Wall Street Journal reports that its own survey of economists reveals a similar concern, if not quite the same degree of pessimism:
Weakness in business capital spending is edging out housing as the dark cloud on the U.S. economic horizon.
A new WSJ.com survey found that 20 of 54 economic forecasters responding to a query cited soft capital spending as the chief risk to their forecast that the U.S. economy will grow slowly but avoid recession this year.
It is pretty clear from whence the worry comes:
The Commerce Department says overall business investment fell an inflation-adjusted 3.1% in the fourth quarter, the first drop since early 2003. And government measures of orders for and shipments of capital goods so far this year have been unexpectedly weak...
The Fed, in minutes of its March meeting released this week, said that "financing conditions and other fundamentals remained favorable for a pickup in capital spending."
But the current softness comes as a surprise to many analysts. Indeed, the Fed minutes noted, "Investment in goods and services other than transportation and high-tech equipment softened more than fundamentals had suggested."
The consensus, however, remains on the side of continued expansion:
Economists responding to the WSJ.com survey were slightly gloomier about the prospects for the U.S. economy than they were a month ago. On average, they now estimate the economy grew at a 2% annual rate in the first quarter, down from the 2.3% estimate they made in March. They predict the economy will grow at a 2.2% pace in the current quarter and pick up momentum in the second half...
On the whole, economists see limited risk of recession over the next 12 months, putting the probability at 26%, near the same level of risk they've forecast since last summer. When asked to identify the one economic indicator they would watch to determine if the economy will slip into recession, 23 of 58 named the Labor Department's monthly employment report...
Although I think Barry was correct in his warnings to not get carried away with the March employment report, the jobs picture is still the best reason to stay calm.
UPDATE: Not surprisingly, The Big Picture notices this story too. Mr Ritholtz, however, seems to think tight monetary policy is the root cause:
When your growth is dependent upon cheap money and easy credit, guess what happens when credit tightens and money becomes less easy?
I don't know about that take -- "money" doesn't seem to me to be the problem. I'd worry about something more fundamental being afoot.