July 25, 2010, 11:22 a.m. EDT
Second quarter gets no respect
By Greg Robb, MarketWatch
WASHINGTON (MarketWatch) -- The second quarter is getting no respect. Only a few weeks ago, the quarter was strutting along the beach. Now even economists are kicking sand in its face.
The main focus on the data in the coming week will be the first estimate of growth in the April-June quarter.
Economists said the second quarter real growth probably came in at an annual rate of just 2.5%, down from the 2.7% rate in the first quarter.
The recovery has averaged a 3.5% growth rate since it started last summer.
U.S. week ahead: Earnings, economic reports on tapExxon, Chevron, Boeing and Sprint lead a long list of earnings reports. An equally long list of economic data, including GDP, consumer sentiment, unemployment and new-home sales awaits investors. MarketWatch's Rex Crum reports.
Just a few weeks ago, economists were looking for a growth rate in the second quarter closer to 3%, and a month before that were predicting a number closer to 4%.
Since then most economic indicators have surprised to the downside.
Consumer spending is now not expected to be robust and the trade sector will be a drag on growth, said Ben Herzon, an economist at Macroeconomic Advisers.
The Commerce Department will release its advance report for gross domestic product in the second quarter on Friday.
The second quarter is looking at the economy in the rear-view mirror. But analysts are having troubling seeing what lies ahead.
Last week, Federal Reserve Board Chairman Ben Bernanke said the economic outlook was "unusually uncertain."
Economists are at odds over whether the loss of momentum in the second quarter will be long-lasting.
Jim O'Sullivan, chief economist at MF Global Inc, is optimistic that the weak "mini-cycle" may be coming to an end,
The stock market suffered its worst quarter in the three months ended in June since the collapse of Lehman Brothers. O'Sullivan said that concern over the health of Europe was the catalyst for the decline in stocks. Now both Europe and the stock market seem on firmer footing, he said. It may take the data a while to catch up, but there should be a turn-around.
On the other hand, Sung Won Sohn, a former Wells Fargo chief economist who teaches at California State University, said the second quarter may be the harbinger of more slowdown to come in the future.
"I think the economy is definitely slowing down and we are at the risk of falling into a long-term sub-par economic growth path for some time to come," Sohn said.
"We don't really have pistons pulling the economy forward and upward except government stimulus and inventories and these factors are going to be losing steam," Sohn said
MarketWatch consensusSee economic calendardate report Consensus previous
July 26 New-home sales 316,000 300,000
July 27 Consumer confidence 52.0 52.9
July 28 Durable-goods orders 0.8% -0.6%
July 29 Jobless claims 460,000 464,000
July 30 GDP 2.5% 2.7% (1Q)
July 30 Employment cost index 0.5% 0.6%
July 30 Chicago PMI 56.3% 59.1%
July 30 Consumer sentiment 67.3 66.5
90559 "I don't expect a double-dip. But we could be looking at a lost decade like Japan," he said.
The government will also release annual benchmark revisions for GDP, which may alter the depth and duration of the recession and the recovery.
In addition to GDP, there will be a steady stream of indicators this week that will be examined for any signs that the slowdown is easing.
On Monday, the Commerce Department will release new home sales data for June. Sales plummeted 33% in May to a record low following expiration of a tax credit for homebuyers. Economists expect new home sales to rebound only 5% to 316,000.
On Tuesday, the Conference Board will release consumer confidence for July. Confidence fell 9.8 points in June to 52.9. Analysts are expecting confidence to drop again to 52.
On Wednesday, the government will release its report on June new orders for durable goods. Economists are expecting an increase of 0.8% following a drop of 0.6% in May. |
