Economy on the brink: Will the US double dip?

Data showing a double-dip in home prices, pessimistic consumers and a slowdown in regional manufacturing raised concerns yesterday that the U.S. economy’s soft patch could become protracted.

“The question is, ‘Is the softer data we’re seeing transitory, or is it likely to persist throughout the remainder of 2011?’ Right now, that’s an open question that investors are trying to figure out,” said Michael Sheldon, chief market strategist at RDM Financial in Connecticut.

A drop in a barometer of business activity in the U.S. Midwest added to other regional reports that have pointed to slower growth in manufacturing this month amid supply chain disruptions from the major earthquake in Japan in March.

The Institute for Supply Management-Chicago business barometer dropped to 56.6 in May from 67.6 in April, its lowest reading since November 2009.

The consumer also appears to be struggling with data last week showing consumer spending was crimped by high gasoline prices in April.

Yesterday’s manufacturing data bodes poorly for a national factory report due today, and casts a cloud ahead of a report on national employment on Friday.

“While weakness in manufacturing may simply reflect auto parts shortages, this is the fifth regional manufacturing index to fall sharply in May,” wrote Chris Low, chief economist at FTN Financial.


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