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
EOG Resources Wednesday, July 30
Equity Residential Wednesday, July 30
Office Depot Wednesday, July 30
Akamai Technologies Wednesday, July 30
Comcast Wednesday, July 30
Avon Products Wednesday, July 30
Noble Energy Wednesday, July 30
Hess Corp Wednesday, July 30
Sealed Air Wednesday, July 30
DTE Energy Wednesday, July 30
Goodyear Tire & Rubber Thursday, July 31
CenturyTel Thursday, July 31
Tyco International Ltd Thursday, July 31
Xcel Energy Thursday, July 31
TECO Energy Thursday, July 31
International Paper Thursday, July 31
Expedia Thursday, July 31
International Flavors & Fragrances Thursday, July 31
CBS Corp Thursday, July 31
Assurant Thursday, July 31
FPL Group Thursday, July 31
Newell Rubbermaid Thursday, July 31
Parker Hannifin Corp Thursday, July 31
Aetna Thursday, July 31
Eastman Kodak Thursday, July 31
Altria Group Thursday, July 31
CVS/Caremark Thursday, July 31
Cognizant Technology Solutions Thursday, July 31
CA Inc Thursday, July 31
AON Corp Thursday, July 31
Millipore Corp Thursday, July 31
Monster Worldwide Thursday, July 31
Progress Energy Thursday, July 31
Chesapeake Energy Thursday, July 31
Massey Energy Thursday, July 31
Kla-Tencor Thursday, July 31
Constellation Energy Group Thursday, July 31
Motorola Thursday, July 31
Dominion Resources Thursday, July 31
Tesoro Corp Thursday, July 31
Mastercard Thursday, July 31
Southwestern Energy Thursday, July 31
Consol Energy Thursday, July 31
Exxon Mobil Thursday, July 31
Marathon Oil Thursday, July 31
Wyndham Worldwide Thursday, July 31
NYSE Euronext Friday, Aug. 1
Chevron Friday, Aug. 1
PPL Corp Friday, Aug. 1
Apartment Investment & Management Friday, Aug. 1
Cigna Corp Friday, Aug. 1
Ingersoll-Rand Friday, Aug. 1
Public Service Enterprise Group Friday, Aug. 1
Washington Post Friday, Aug. 1
Ameren Corp Friday, Aug. 1
Clorox Friday, Aug. 1
Sun Microsystems Friday, Aug. 1
FirstEnergy Corp Friday, Aug. 1
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