y Jeffry Bartash , MarketWatch Last Update: 12:01 PM ET Aug 25, 2013 WASHINGTON (MarketWatch) — Consumers feel a bit better these days about the economy, and the U.S. probably grew faster in late spring than originally believed, but the nation still isn’t close to firing on all cylinders. The latest round of economic signposts this week is likely to show the U.S. straddling a modest path of growth, which is no surprise after years of slow expansion. Analysts predict a mild increase in consumer spending and wages, a higher growth rate for the second quarter and little change in how consumers feel about the economy. More important, a continuation of current growth trends is likely to keep the Federal Reserve on track to “taper” its bond-buying strategy as early as September. Stock and bond prices have see-sawed over the past few weeks as investors try to figure out what the Fed will do. “All the focus is on the taper,” said senior economist Ryan Sweet of Moody’s Analytics. Business and consumers The week kicks off with the durable-goods report on Monday. Orders for big-ticket items such as cars, appliances and machine tools probably fell sharply in July. Yet much of the reversal will reflect fewer bookings for Boeing after a surge in June — orders for commercial jets fell to 90 from 287. Investors will keep a close watch on orders minus defense and aircraft, a good proxy for whether businesses are boosting investment. Some slowdown could be in order after a solid pickup in investment during the summer. The consumer confidence index for August, released Tuesday, is expected to dip slightly from July‘s score of 80.3. The consumer sentiment index on Friday could show a similarly small decline from its last reading of 80.0. Both indexes have recently touched post-recession highs. Economists say consumers have been partially comforted by higher home values, more help-wanted signs, a leveling-off of gas prices and, until recently, sharp stock gains. No one should be fooled into thinking that the U.S. is suddenly in another era of good feeling however. “Consumer confidence has seen some improvement, but historically it’s still depressed,” pointed out Sam Bullard, an economist at Wells Fargo. The nation’s high unemployment rate, at 7.4%, underlies the more optimistic but still cautious outlook of consumers, he said. GDP growth boost The U.S. growth rate for the second quarter, meanwhile, is likely to get a hefty boost when the government releases its second estimate of gross domestic product. The report comes out Thursday. The revised number, which includes information not available in the first go-around, could show the economy grew 2.3% instead of a lackluster 1.7% as initially reported. The reason: somewhat higher business investment and a smaller trade gap with the rest of the world. Does it matter much to Wall Street? Probably not. “It will put us on a slightly more favorable trajectory in the second half of the year, but I don’t think it will appreciably alter the view of the economy,” Sweet said. The biggest report of the week, consumer spending and income, probably won’t dazzle anyone, either. Americans aren’t spending as much as they usually do during an economic expansion because their wages aren’t growing all that fast. “Income growth is weak and that could dampen consumer spending,” said Sweet, who noted that spending got off to a slow start in the third quarter. Without a big push from consumers, who generate the bulk of economic activity, the U.S. appears consigned to more of the same: Not-too-hot and not-too-cold kind of growth.
Posted on: Mon, 26 Aug 2013 05:25:54 +0000
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