Here Is What To Watch Out For Today In Addition To GDP (Consensus At 2.6%, Range 1.0%-4.0%)

With everyone focusing on today’s GDP, it is easy to ignore the other relevant economic data to be released in the one and a half hour block before 10am. In order of appearance, they are: Q2 GDP,the employment cost index, the Chicago PMI, and the final UMichigan consumer sentiment. Below is a summary from a rather bearish Goldman Sachs (which expects a 2.0% GDP print in 15 minutes) on each of these data points.

8:30: GDP for Q2….slower growth and a deeper recession? The first cut on second-quarter growth should show further slowing from the 2.7% rate now on record for the first quarter, though with significant increases in both residential and nonresidential investment (the former due to the transitory effects of the homebuyer tax credit).  Trade should be a big drag.

The report comes alongside annual revisions to the past three years that make us less confident in the second quarter call than on most others, because figures for the first quarter will also change.  The gap that developed between real GDP and real gross domestic income (GDI) during the recession suggests that the revision to real GDP will most likely show a deeper peak-to-trough setback than the 3.8% now on record.

On GDP, GS: +2.0%; median forecast (of 81): +2.6%, ranging from +1.0% to +4.0%; last (Q1 third estimate) +2.7%.
On the GDP price index, GS: +1.0%; median forecast (of 42): +1.1%, ranging from +0.4% to +1.5%: +1.1%.
On the PCE core index: GS: +1.0%; median forecast (of 20): +1.0%, ranging from +0.3% to +1.4%; last: +0.7%.

8:30: Employment cost index for Q2…a return to smaller gains?  Figures for the first quarter were skewed to the high side by a large increase in benefits.  We expect the second-quarter data to be more consistent with the moderating trend that had been evident before this latest report.

GS: +0.4%; median forecast (of 54): +0.5%, ranging from +0.3% to +0.7%; last +0.6%.

9:45: Chicago purchasing managers’ index for July…slowing?  Virtually all surveys for July show a slowing in industrial momentum.  (Yesterday’s Kansas City Fed index was an exception.)  We and most other forecasters expect slower activity in the Chicago area as well, though recovery in the auto sector should keep the index from dropping sharply.

GS: 57.5; median forecast (of 53): 56, ranging from 50 to 60; last 59.1.

10:00 (9:55 to subscribers): Reuters/University of Michigan consumer sentiment for July (final)…confirming that sharp decline?  The preliminary results for July showed a sharp setback in confidence.  Normally, the final index does not move much from the preliminary, and this is reflected in a median forecast that is only ½ point above the preliminary reading (after a 9.5-point drop).  For what they are worth, other indexes (Conference Board, ABC) have both deteriorated in the two weeks since the preliminary Michigan survey was taken.  The median expectation for inflation five to ten years ahead ticked up to 2.9% in the preliminary report from 2.8% previously.

Median forecast (of 58): 67, ranging from 57.5 to 73; last 66.5 (July prelim).

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