Investors have been too riveted to the drama in Washington over Wall Street’s mega-bailout to focus much attention on economic data. Now, with an agreement among lawmakers imminent, market reaction to the historic legislation will be a key feature of the coming week’s economic news. Analysts agree that the government’s plan to buy troubled mortgage-related assets will have little impact on the near-term path of the economy, but investors will most likely be looking beyond the economy’s current woes to prospects that the bailout will remove a major financial-market risk to future growth and that the program will eventually promote a recovery.
If anything, recent events only add to the drags on near-term growth. New stress in the credit markets implies the credit crunch will tighten credit availability a notch further. New uncertainty will dampen confidence even more and most likely delay spending by both consumers and businesses. The August drop in factory orders for capital goods suggested companies were already increasingly hesitant to move forward on capital projects and hiring plans. More economists now look for little if any growth in the second half, and there's a rising chance real gross domestic product could contract in the fourth quarter.
Economic reports in the coming week are expected to show the continued weak state of the economy. Much of the focus will be on consumers and the deteriorating backdrop for household spending. The last of the tax rebate checks went out in early July, so August personal income data will be the first month unaffected by that program. August data on consumer spending will likely reflect the softness seen in the month’s retail sales numbers, and they are expected to confirm that real consumer spending is set to post its first quarterly drop in 18 years.
Perhaps more important on the consumer front, new survey data on September consumer confidence was most likely gathered early enough to capture some household concerns over the collapse of Lehman Brothers, the takeover of American International Group, and the ensuing market turmoil that led up to Washington’s $700 billion rescue plan. The brunt of that impact on confidence will show up in the October reports.
Recent confidence surveys have shown households’ main worry is jobs, and the news from the labor markets this week is certain to be discouraging. The Labor Dept. will release its September employment report on Friday, and economists expect another moderate decline in payrolls of about 80,000 and no relief from the recent jump in the unemployment rate; it hit 6.1% in August and is expected to have stayed there in September. The recent upward spike in weekly new claims for unemployment insurance raises the possibility the drop in payrolls could be larger than expected, and with the economy further weakened by recent events, the jobs markets are certain to show continued stress in coming months.
Here’s the weekly economic calendar from Action Economics.
Top Economic Reports
Reports
Date
Time
For
Median Estimate
Last Period
Personal Income
Monday, Sept. 29
8:30 p.m.
August
0.2%
-0.7%
Personal Consumption Expenditures
Monday, Sept. 29
8:30 a.m.
August
0.2%
0.2%
Chicago Purchasing Managers Index
Tuesday, Sept. 30
10 a.m.
September
54.6
57.9
Consumer Confidence Index
Tuesday, Sept. 30
10 a.m.
September
60
56.9
ISM Index (manufacturing)
Wednesday, Oct. 1
10 a.m.
September
49.8
49.9
Construction Spending
Wednesday, Oct. 1
10 a.m.
August
-0.2%
-0.6%
Domestic Auto Sales (mil)
Wednesday, Oct. 1
afternoon
September
4.5
4.5
Domestic Light Truck Sales (mil)
Wednesday, Oct. 1
afternoon
September
5.6
5.9
Factory Orders
Thursday, Oct. 2
10 a.m.
August
-1.0%
1.3%
Domestic Light Truck Sales (mil)
Wednesday, Oct. 1
afternoon
September
5.6
5.9
Factory Orders
Thursday, Oct. 2
10 a.m.
August
-1.0%
1.3%
Domestic Light Truck Sales (mil)
Wednesday, Oct. 1
afternoon
September
5.6
5.9
Factory Orders
Thursday, Oct. 2
10 a.m.
August
-1.0%
1.3%
Nonfarm Payrolls (thousands)
Friday, Oct. 3
8:30 a.m.
September
-80
-84
Manufacturing Payrolls (thousands)
Friday, Oct. 3
8:30 a.m.
September
-45
-61
Unemployment Rate
Wednesday, Oct. 1
8:30 a.m.
September
6.1%
6.1%
Average Hourly Earnings
Friday, Oct. 3
8:30 a.m.
September
0.3
0.4
Average Weekly Hours Worked
Friday, Oct. 3
8:30 a.m.
September
33.7
33.7
ISM Index (nonmanufacturing)
Friday, Oct. 3
10 a.m.
September
50.0
50.6