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Data Fuel Debate Over Economy

This summer's mixed bag of strong earnings growth and conservative company forecasts combined with soft economic data are fueling a debate about whether the United States is facing an economic slowdown.

Economic data in June were slow over a wide range of areas including retail sales, industrial production, jobs and housing. Analysts say they will be looking for improvements in July.

"July is a critical month. Does the economy stay on an accelerated course or are we seeing a slowdown?" said Tim Ghriskey, chief information officer at Solaris Asset Management.

Strong earnings reports in the second quarter were accompanied by company warnings about cautious technology spending. Other worrisome signs included slower sales growth at blue-chip manufacturers such as 3M (MMM.N: Quote, Profile, Research) , rising auto and semiconductor inventories, and an easing in General Electric Co.'s (GE.N: Quote, Profile, Research) June short-cycle orders for various products.

Some economists called the slow June data an anomaly due to worries about the war in Iraq, mounting pricing pressure in technology and bad seasonal weather.

But Lakshman Achuthan, managing director at Economic Cycle Research Institute, said he thinks the recovery has reached a deceleration phase.

"We are still going to get growth, but not the profit growth we saw earlier and that drives capital spending," Achuthan said.

Federal Reserve Chairman Alan Greenspan last week pointed to signs of weakness in the economy, saying businesses were unusually reluctant to spend and hire, and the economy could benefit if that caution ebbs...