Vital Signs for Week of July 4

On tap: June labor market figures, factory orders data for May, the national nonmanufacturing index survey for June, and more

A small divergence between consumer and business sentiment has emerged. Businesses appear to be more concerned about the recent run-up in oil prices than consumers. Companies are also contending with slower global economic growth and a recent strengthening of the dollar. Consumers feel more optimistic because they believe the job market is improving and the housing market continues to climb sky high.

The difference between consumer and corporate attitudes makes the June labor market data important. Household spending, and a large part the economy's health, depends on continued business hiring in the face of uncertainty. The consensus forecast from Action Economics calls for a 190,000 pick-up in company payrolls. While it's important not to place too much emphasis on one report, the June figures take on added significance after lackluster figures for May. So far, the weakness in Corporate America has been focused within manufacturing. May durable goods figures were soft, and the factory orders number, once civilian aircraft orders are stripped out, will likely look tepid as well. The Institute for Supply Management's (ISM) June factory activity index did provide some hope that manufacturers are coming out of their spring funk. The new orders and production indexes were higher, although it appears orders from abroad slowed considerably.

The ISM's nonmanufacturing activity report is expected to show that the service sector is holding up well. Indeed, the May consumer spending figures from the Bureau of Economic Analysis showed a 0.4% increase in expenditures for services. Chain store sales are also expected to show improvement in June because of the hot summer weather.

After a good jobs report, the next best news for the economy would be a further slide in oil prices. Better than expected crude oil inventory levels last week caused the price of crude to come back below $60 per barrel. If oil prices moderate a little more and show less volatility, it would go a long way towards boosting business confidence and ensuring a strong second-half performance by the economy.

Here's the week's economic calendar.

Independence Day will make for a short week. The financial markets and government offices will be closed on Monday, July 4.


Tuesday, July 5, 10 a.m. EDT

Factory orders probably jumped in May, due in large part to aircraft orders. Economists polled by Action Economics expect a 2.8% surge in new orders, following a 0.9% bounce in April, and a 0.7% gain in March. The recently published data on durable goods orders showed a 5.5% surge for May. The big increase was thanks to a 164.5% takeoff in nondefense aircraft orders. New orders for large equipment, such as jets, are quite volatile. Looking at a core measure of orders which excludes defense and aircraft orders, May capital goods orders were off by 2.3%, after a 1.7% increase in April.


Wednesday, July 6-8

U.S. President George W. Bush and other national leaders of the Group of 8 countries meet for two days at the Gleneagles Hotel in Perthshire, Scotland.

7:15 a.m. EDT

Federal Reserve Bank of St. Louis President William Poole takes part in a panel discussion entitled, "After Greenspan: Wither Fed Policy?" at the Western Economic Association International's annual conference in San Francisco.


Wednesday, July 6, 7 a.m. EDT

The Mortgage Bankers Association releases its numbers on mortgage applications for both home buying and refinancing for the week ending July 1. In the week ended June 24, the purchase index slipped to 477.4, from 479.4 in the previous period and a record high of 529.3 in the week ended June 10. The four-week moving average, bounced up to 491.35, from 487.7 for the week ended June 17. The average rate on a conventional 30-year mortgage, according to HSH Associates, fell to 5.78% during the week ended June 24. For the week ended June 17, the mortgage rate stood at 5.81%.

The MBA's refi index shot higher. In the period of June 24, the index moved down to 2529.2, from 2575 in the week ended June 17, and 2967.4 in the prior week. The four-week moving average, however, surged to 2608.4, from 2511.7, in the week ended June 17.


Wednesday, July 6, 7:45 a.m. EDT

This weekly tracking of retail sales, compiled by the International Council of Shopping Centers and UBS bank, will update buying activity for the week ending July 2. In the week ended June 25, sales fell 0.6%, after a 0.1% gain in the week ended June 18, and a 0.6% rise in the previous period.


Wednesday, July 6, 8:55 a.m. EDT

This weekly measure of retail activity will report on sales for the fifth and final fiscal week of June, ended July 2. During the first four fiscal weeks of June, ended June 25, sales were unchanged compared with the same period during May. May sales were up 2.5% vs. April.


Wednesday, July 6, 10 a.m. EDT

The Institute for Supply Management releases its latest index of business activity in the mostly services, non-manufacturing sector. The consensus among economists surveyed by Action Economics is that the June reading will remain at 58.5%. In May, the index slipped to 58.5%, from an April level of 61.7%, and a March reading of 63.1%.

While the May headline index eased, both the new orders and unfilled orders indexes rebounded. The new orders reading for May was 59.7%, up from 58.8% in April and the unfilled orders index stood at 56.5%, from 54% in April. What's more, there was a big jump in the index covering new export orders, to 62% in May, from 52.5%. The numbers bode well for future business activity.


Thursday, July 7, 9:30 a.m. EDT

U.S. Treasury Secretary John Snow speaks about the U.S. economy and Social Security at a chamber of commerce in Omaha, Neb.


Thursday, July 7

Alcoa, Accenture, and more.


Thursday, July 7

The International Council of Shopping Centers will release its June same-store sales figures for major U.S. chain retailers. According to the ICSC, June sales probably increased 4.5% from a year ago. In its weekly retail sales snapshot, the ICSC cited strong seasonal sales due to hot weather. In May, same-store sales rose 2.9% from the same period a year ago. April sales were up 2.2% from a year ago.


Thursday, July 7, 8:30 a.m. EDT

First-time claims for jobless benefits for the week ended July 2 most likely moved up to 320,000. Jobless claims eased to 310,000 in the week ended June 25, after dropping to 316,000 in the prior week, from 335,000 for the week of June 11.

The four-week moving average eased back to 323,500, from 333,800 during the previous period. Continuing jobless claims for the week ended June 18 held at 2.6 million for a second straight period.


Friday, July 8

U.S. Treasury Secretary John Snow meets with Canadian Finance Minister Ralph Goodale in Calgary, Canada.

1:30 p.m. EDT

Federal Reserve Bank of Kansas City President Thomas Hoenig speaks about the U.S. economic outlook in Hastings, Nebraska.


Friday, July 8, 8:30 a.m. EDT

Employers are believed to have picked up the pace of hiring in June. Economists polled by Action Economics expect June payrolls to have expanded by 190,000. May payrolls increased by a smaller than expected 78,000 workers, after growing by 274,000 jobs in April and 122,000 workers in March. Average hourly pay is forecast to have increased 0.2% in June, after a 0.2% rise in May, and two straight monthly gains of 0.3%.

The June jobless rate is expected to have held at 5.1% even with the upbeat jobs forecast. A possible cause of a higher jobless rate in tandem with strong job gains is a wave of new jobseekers. In May, the unemployment rate ticked down to 5.1%, from 5.2% in both April and March.

More job losses in the factory sector are anticipated. Economists are forecasting a decline of 5,000 jobs in June, after falls of 7,000 in May and 9,000 in April.


Friday, July 8, 10 a.m. EDT

Wholesale sales probably kept growing during May. The consensus among economist queried by Action Economics is for a monthly gain of 0.7%. In April, wholesale sales jumped 1.5% on a broad-based increase in sales and a 0.1% fall in petroleum sales. Petroleum sales surged in March due to higher prices. For the entire first quarter, petroleum sales were up by an annualized rate of 18%. Wholesale sales are not measured by volume but by dollar value.

Inventories rose 0.8% in April, after a 0.6% increase in March. With sales rising faster than inventories in April, the inventory-to-sales ratio eased to 1.18, from 1.19 in both March and February.


Friday, July 8, 3 p.m. EDT

Consumers probably racked up $4.5 billion in additional debt in May. That's the median estimate of economists queried by Action Economics. In April, consumer credit grew by $1.3 billion, after a March gain of $6.9 billion. Consumers have been paying down their credit card bills the last two months. The level of revolving credit fell $0.4 billion in April and $0.6 billion in March.

By James Mehring

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