The nation's economy has hummed like a well-oiled machine for two years now, but economists fear that weaknesses are emerging.

The swelling crisis in Asia is weighing down stock prices here, which could ultimately reverse the bull market "wealth effect" that rekindled consumer spending this spring. At the same time, an enormous business inventory overhang is building.

"Businesses typically become vulnerable to excessive optimism about sales prospects during periods of unusually strong spending growth," according to economists at Chase Securities Inc., New York, a unit of Chase Manhattan Corp.

But a large volume of sales are being satisfied by foreign-made products, notably computers, whose prices are falling because of currency devaluations in Asia. "Sales growth of U.S.-made goods and services has moderated considerably," they noted.

Chase's economists, James Glassman, Christopher Widness, and Bill Sharp, warned that the inventory buildup is partly hidden because of falling prices and not fully revealed by government data.

Meanwhile, the consumer spending wave cannot grow as it has, they cautioned.

"Consumer spending gains in the past two years have been powered by the exceptional stock-market-driven jump in household wealth," they said. "The market has lost momentum, however, as investors have begun to reassess corporate earnings prospects.

"A return to more normal stock market gains would result in diminished spending stimulus, with the savings rate already rock-bottom (at 3.5% of income)," they said.

Bruce Steinberg, chief economist at Merrill Lynch & Co., said the two drivers of recent consumer spending have been the strength of the job market and strength of the stock market-but neither are sustainable.

"Real income is up a robust 3.8% from a year ago, yet spending growth is stronger still, up 4.5% in April and perhaps 5.5% in May," he said. The excess of consumer spending beyond income gains clearly reflects the wealth effect of the stock market, he said.

At the same time, he expects job growth to slow with the economy because of bulging inventories and the nation's rapidly deteriorating trade balance with Asia.

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