Markets & Finance

Vital Signs: A Weaker Second Half?


On deck: consumer confidence, GDP, employment costs, ISM manufacturing index, car sales, construction spending, and the employment report

This week will offer a look back at the second quarter and a peek ahead at how the second half of the year is shaping up. For the Commerce Dept.'s initial estimate of last quarter’s economic growth, economists expect real gross domestic product to show a gain of 1.8% (annual rate). Several analysts forecast growth of better than 2%, fueled by resilient consumer spending and another big plus from foreign trade. The second-quarter pace would follow first-quarter growth of 1%.

That hardly looks like a recession. However, maybe the most important part of this report will be the annual revisions to previous data. Often during turning points in the economy, the immediate data fail to capture the full extent of the economy’s weakness. With more complete source data now in hand, the Commerce Dept.’s update on GDP growth over the past year could change perceptions about just how weak--or resilient--the economy has been in recent quarters.

The key issue now, though, is the economy’s momentum in the second half. Heading into 2008, economists generally expected a recession-like first half, with little or no growth, followed by a slightly firmer pace of growth in the second half. Reality may turn out to be just the opposite: The second half is shaping up to be weaker than the first. Soaring gas prices are depressing the buying power of household incomes and negating much of the stimulus from the tax rebates. Trouble at mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) are tightening the supply of mortgage credit, sending mortgage rates higher and reducing housing affordability. And when the effect of the tax rebates has run its course, consumer spending in the fourth quarter could turn sharply weaker, dragging down economic growth even more.

Several reports this week for the month of July will offer some clues to the economy’s standing at the start of the second half. There's no reason to expect anything but another gloomy assessment from Tuesday's data on consumer confidence, given the downbeat headlines about the market turmoil surrounding the problems at Fannie and Freddie. And on Friday, July car sales are certain to look weak again. Auto production actually picked up in June, boosting manufacturing output, but that gain mainly reflected a catch-up in activity after the end of the strike at a key industry supplier, American Axle (AXL). Friday’s survey of July manufacturing activity from the Institute for Supply Management will give an important reading on how factory activity is holding up.

Perhaps the most important data this week will come Friday from the Labor Dept.’s employment report for July. Since payrolls began to fall in January, the job losses have been relatively modest, compared to the drop-off seen in past recessions. Economists expect another modest decline of about 60,000 jobs, similar to the June decrease, and they look for the jobless rate to hold steady at the June reading of 5.5%. Any dramatic turn for the worse in employment would suggest a further weakening in the economy in the second half.

Here’s the weekly economic calendar, from Action Economics.

Top Economic Reports

Reports

Date

Time

For

Median Estimate

Last Period

Consumer Confidence Index

Tuesday, July 29

10:00 a.m.

July

49.9

50.4

GDP (Advance)

Thursday, July 31

8:30 a.m.

Q2

1.8%

1.0%

GDP Chain Price Index

Thursday, July 31

8:30 a.m.

Q2

2.4%

2.7%

Employment Cost Index

Thursday, July 31

8:30 a.m.

Q2

0.7%

0.7%

Chicago Purchasing Managers Index

Thursday, July 31

9:45 a.m.

July

49.4

49.6

Nonfarm Payrolls (Thousands)

Friday, Aug. 1

8:30 a.m.

July

-60

-62

Manufacturing Payrolls (Thousands)

Friday, Aug. 1

8:30 a.m.

July

-35

-33

Unemployment Rate

Friday, Aug. 1

8:30 a.m.

July

5.5%

5.5%

Average Hourly Earnings

Friday, Aug. 1

8:30 a.m.

July

0.3%

0.3%

Weekly Hours Worked (Hours)

Friday, Aug. 1

8:30 a.m.

July

33.7

33.7

ISM Index (Manufacturing)

Friday, Aug. 1

10:00 a.m.

July

49.8

50.2

Construction Spending

Friday, Aug. 1

10:00 a.m.

June

-0.2%

-0.4%

Domestic Auto Sales (Millions)

Friday, Aug. 1

afternoon

July

5.0

4.9

Domestic Light Truck Sales (Millions)

Friday, Aug. 1

afternoon

July

4.9

4.8

Other reports and events

Other Reports and Events

Date

Time

For

Dallas Fed Survey

Monday, July, 28

10:30 a.m.

July

SPEECH: Fed Governor Mishkin

Monday, July, 28

12:30 p.m.

ICSC-UBS Store Sales

Tuesday, July 29

7:45 a.m.

July 20-26

Johnson Redbook Weekly Store Sales

Tuesday, July 29

8:55 a.m.

July 20-26

S&P Case Shiller House Price Index

Tuesday, July 29

9:00 a.m.

May

Mortgage Applications

Wednesday, July 30

7:00 a.m.

July 20-26

ADP Employment Report

Wednesday, July 30

8:15 a.m.

July

Initial Unemployment Claims

Thursday, July 31

8:30 a.m.

July 20-26

Kansas City Fed Survey

Thursday, July 31

11:00 a.m.

July

Earnings Calendar

Company

Report Date

Tyson Foods

Monday, July, 28

Simon Property Group

Monday, July, 28

Kraft Foods

Monday, July, 28

Amgen

Monday, July, 28

Hartford Financial Services Group

Monday, July, 28

Plum Creek Timber Co.

Monday, July, 28

Manitowoc Co.

Monday, July, 28

Questar

Monday, July, 28

Kellogg

Monday, July, 28

Verizon Communications

Monday, July, 28

Lorillard

Monday, July, 28

Loews Corp.

Monday, July, 28

National Oilwell Varco

Tuesday, July 29

Bemis Co.

Tuesday, July 29

McGraw-Hill Cos.

Tuesday, July 29

Waste Management

Tuesday, July 29

Viacom

Tuesday, July 29

Embarq Corp.

Tuesday, July 29

Lincoln National

Tuesday, July 29

Centex Corp.

Tuesday, July 29

CB Richard Ellis Group

Tuesday, July 29

Electronic Arts

Tuesday, July 29

Genworth Financial

Tuesday, July 29

MetLife

Tuesday, July 29

Fiserv

Tuesday, July 29

Valero Energy

Tuesday, July 29

Colgate-Palmolive

Tuesday, July 29

Masco Corp.

Tuesday, July 29

Coach

Tuesday, July 29

Entergy Corp.

Tuesday, July 29

Northrop Grumman

Tuesday, July 29

United States Steel

Tuesday, July 29

Kimco Realty

Wednesday, July 30

Tyco Electronics

Wednesday, July 30

Meredith Corp.

Wednesday, July 30

Corning

Wednesday, July 30

Moody's Corp.

Wednesday, July 30

Automatic Data Processing

Wednesday, July 30

IAC/InterActiveCorp

Wednesday, July 30

American Tower

Wednesday, July 30

RR Donnelley & Sons Co

Wednesday, July 30

Southern Co

Wednesday, July 30

Cameron International

Wednesday, July 30

Unum Group

Wednesday, July 30

Walt Disney

Wednesday, July 30

Starbucks

Wednesday, July 30

Prudential Financial

Wednesday, July 30

General Growth Properties

Wednesday, July 30

Allegheny Energy

Wednesday, July 30

Express Scripts

Wednesday, July 30

Allied Waste Industries

Wednesday, July 30

AvalonBay Communities

Wednesday, July 30

Murphy Oil

Wednesday, July 30

Jones Apparel Group

Wednesday, July 30

Allergan Inc/United States

Wednesday, July 30

Reynolds American

Wednesday, July 30

Cummins

Wednesday, July 30

Symantec

Wednesday, July 30

Interpublic Group of Cos

Wednesday, July 30

Total System Services

Wednesday, July 30


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