Wells economic outlook: Slow growth, uncertainty continue

The economic recovery so far this year has "indeed lived down to our modest expectations," Wells Fargo & Co. economists said in a report released today.

After a gain of 3 percent in the fourth quarter last year, the economy has grown just 1.7 percent in the first half of 2012. That sluggish pace is likely for the second half of the year, too, Wells said in its latest monthly economic outlook.

"The economy continues to grow, but the pace of growth is not enough to satisfy job expectations by households, the profits of investors or the public purse at all levels of government," the report said. "For decision-makers, the challenge remains to find an operational guideline in an economy of modest positive growth with neither boom nor bust."

There have been positive signs in personal consumption, equipment and software spending and residential construction, but in each case, the gains were weaker than expected, the economists found. Meanwhile, net exports and federal and local government spending continue to hamper growth.

The global economy has lost momentum, too, with China registering the slowest growth rate in three years and many European countries slipping back into recession. Wells economists predict the global economy will grow about 3 percent this year, the slowest since 2009, provided Europe does not "blow up," they wrote.

In a worst-case scenario in the euro zone, another global financial crisis could occur, the report said. Uncertainty is likely to continue in the coming months, but ultimately "in our view, the most likely scenario is one of 'muddle through,'" the economists said.