Automakers are starting up production again not only because they are out of bankruptcy but because inventories of autos have been drawn down to the point that shortages of some popular models are emerging. That mirrors a trend in other sectors, where a long period of selling off bloated inventories of goods since last year has produced lean stocks that now must be replenished by starting up production again.
Harm Bandholz, economist at Unicredit Markets, said he expects the economy to post a 2 percent growth rate in the summer quarter, thanks to the rebound in inventories, the one-time boost from the clunkers program, and the beginning of effects from stimulus spending on infrastructure projects.
But he worries that these helpful elements will not last, and the economy will fall back toward anemic growth or recession again after a couple of quarters of growth. His principal concern is that consumers — who normally fuel 70 percent of economic growth — will not be able to sustain a recovery because they are still losing jobs and income despite a modest boost they received recently from federal tax cuts and income transfers in the stimulus bill.
The nearly 50 million consumers who received one-time $250 Social Security checks in May and June appear to have largely saved the money, economic reports show. And the $50 billion boost for middle-class taxpayers from President Obama’s Making Work Pay tax credit, which went into effect in April, has been largely offset by a comparable increase in gasoline prices during the same time, economists say.
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