Plus: Economists Still Optimistic about U.S. Growth, Jobless Claims Drop and Renewing Interest in Fuel-Efficient Autos.

S&P Issues U.S. Debt Warning
Credit-rating agency Standard & Poor’s (S&P) last week downgraded the United States’ credit outlook from “stable” to “negative” due to mounting concerns over the nation’s debt and uncertainty about long-term plans to bring down the deficit.

Although S&P didn’t lower the U.S.’s top-tier AAA rating, it marked the first time the country’s outlook has fallen from stable, signaling a one-in-three chance of an actual downgrade in the credit rating in the next two years, according to MarketWatch. In essence, the negative outlook was a warning that the U.S. must develop a strong plan to manage and eventually lower its rapidly rising national debt.

“The U.S. debt now stands at $14.219 trillion — just shy of the $14.294 trillion cap — and is expected to balloon in part because of rising costs for health care, retirement and other so-called entitlement programs, and the interest on existing debt,” the Wall Street Journal reports. “If no action is taken, the government could default on its debt by July 8. Wall Street executives have called Capitol Hill with increasing frequency in recent weeks, urging it to raise the debt ceiling immediately.”

In addition, the 2011 budget deficit is forecast to rise to between $1.5 trillion and $1.65 trillion, pushing it up to approximately 10 percent of the nation’s gross domestic product (GDP). A group of Democratic and Republican leaders are expected to convene next month to develop a framework for cutting down the deficit.

“If an actual downgrade were to occur, the effects would ripple through financial markets. When S&P lowers the credit rating on a country, it’s saying that there’s a greater chance the country won’t pay its debts,” the Associated Press explains. “Creditors demand higher borrowing rates. In the U.S. it would mean higher interest payments for the federal government. All borrowers — from companies, homeowners to credit card users — would find it harder to borrow.”

Economists Still Optimistic about U.S. Growth
Despite political unrest in North Africa and the Middle East and last month’s devastating earthquake and tsunami in Japan, economists are hopeful that the U.S. economy is substantially improving, according to new findings from the National Association for Business Economics (NABE).

In the survey of 72 NABE members, including economists for private companies and trade groups, 94 percent forecast real GDP to increase by more than 2 percent in 2011, while nearly 40 percent expect real GDP growth in excess of 3 percent.

Sales increased for a third consecutive quarter, and profit margins continued to improve, with rising employment reported for the fifth consecutive quarter. No survey respondents expect significant layoffs in the next six months.

“NABE’s April 2011 Industry Survey makes clear that despite geopolitical concerns, higher oil prices and uncertainties created by the disasters in Japan, the economy continues to recover,” Shawn DuBravac, chief economist for the Consumer Electronics Association, said in a summary of the findings. “Companies appear to be positioning themselves for a firming economic environment by increasing capital expenditures.”

At the same time, economists remain uncertain about the risks that remain in unstable parts of the world. More than one-third of the panelists expect U.S. firms to face higher costs for raw materials as Japan looks to rebuild quake- and tsunami-battered regions, Agence France-Presse reports, and about 52 percent expect economic growth to be weaker in 2011 because of political turmoil in Bahrain, Egypt, Tunisia, Libya and Syria, the Associated Press explains.

Jobless Claims Remain Above 400,000
New initial jobless claims decreased in the latest week reported, offsetting some of the losses incurred from a sharp and unexpected rise the previous week. According to the U.S. Department of Labor, seasonally adjusted unemployment claims fell by 13,000 for the week ending April 16, bringing the total down to 403,000.

However, the four-week moving average increased 2,250, signaling continued difficulties in the job market. The prior week’s surge in unemployment claims was largely attributed to a seasonal fluctuation caused by workers who delayed filing their claims applications until the start of the new quarter.

“The rise could also be partly due to disruptions in the U.S. auto industry stemming from the earthquake and tsunami in Japan, some economists said. Several states reported layoffs had risen in the auto and manufacturing industries,” the AP reports. “Toyota Motor Co., Nissan and Ford Motor Co., have said in recent weeks that they are slowing production this month because they can’t obtain enough auto parts, many of which are imported from Japan.”

Lingering problems in the employment market are likely to have broader economic effects that could slow the recovery.

“The level of claims is little changed from the end of 2010, a sign of an uneven recovery in employment that’s making it difficult for consumer spending, the biggest part of the economy, to accelerate,” Bloomberg News explains. “The lack of faster job growth is one reason Federal Reserve policy makers intend to complete their asset-purchase plan and keep borrowing costs near zero.”

Gas Prices Renewing Interest in Fuel-Efficient Autos
In the face of rising gas prices, 62 percent of car buyers surveyed in March and April said they would consider a more fuel-efficient vehicle for their next purchase, up from 53 percent in January and February, according to a new survey from AutoTrader.com.

The survey findings are backed by other data from the consumer information website’s latest monthly Trend Engine report, which highlights car-shopping activity on the website each month. The March report showed several fuel-efficient models making strong gains.

In the Trend Engine report, the new Ford Fiesta jumped from No. 28 in February to No. 18 in March, and the new Chevrolet Cruze moved up from No. 14 to No. 11. Similar gains were made among other fuel-efficient vehicles: the new Volkswagen Jetta rose from No. 11 in February to No. 9 in March, and the new Hyundai Elantra jumped from No. 18 to No. 14.

The lists of most-searched used vehicles and most-searched certified pre-owned vehicles (CPO) reflected much of the same. On the first list, the more fuel-efficient cars made notable gains, with four of these cars jumping at least four spots; on the second list, fuel-efficient CPO cars were the only ones to gain any notable ground.

The only vehicles to lose ground on the list of most-searched used vehicles were trucks and sport utility vehicles (SUVs). Of the 10 trucks and SUVs on the list, seven dropped to lower positions.

AutoTrader.com’s inaugural “Top 10 Big Movers” list last month, which analyzes site traffic on models that gained significantly more consumer interest month-over-month, also illustrated the trend of consumers shifting interest to more fuel-efficient vehicles. Three hybrid cars and three smaller cars dominated the list.