Wall Street’s ‘Super Bowl’ set to kick off
GDP, new U.S. jobs in January highlight huge week of data
WASHINGTON (MarketWatch) — Investors will get smothered by a stream of economic smoke signals this week, starting with demand for big-ticket U.S.-made goods and ending with the key January jobs report. http://www.marketwatch.com/story/wall-streets...atest_news
Tucked in between is fourth-quarter GDP — how fast the U.S. economy grew in the last three months of 2012. And throw in the Federal Reserve’s first big meeting of the year.
“Brace for a Super Bowl of economic data,” in the words of Joseph LaVorgna, chief U.S. economist at Deutsche Bank.
| date | report | Consensus | previous |
|---|---|---|---|
| Jan. 28 | Durable goods orders | 2.3% | 0.8% |
| Jan. 29 | Consumer confidence index | 64.6 | 65.1 |
| Jan. 30 | Gross domestic product | 1.0% | 3.1% |
| Jan. 31 | Weekly jobless claims | 355,000 | 330,000 |
| Jan. 31 | Employment cost index | 0.5% | 0.4% |
| Jan. 31 | Personal incomes | 0.8% | 0.6% |
| Jan. 31 | Consumer spending | 0.3% | 0.4% |
| Feb. 1 | Nonfarm payrolls | 160,000 | 155,000 |
| Feb. 1 | Unemployment rate | 7.8% | 7.8% |
| Feb. 1 | UMich consumer sentiment | 71.4 | 71.3 |
| Feb. 1 | ISM | 50.5 | 50.7 |
| Feb. 1 | Construction spending | 0.7% | -0.3% |
| Feb. 1 | Motor vehicle sales | 15.2 mln | 15.3 mln |
What all these things won’t tell us, however, is precisely how consumers reacted to an increase in their taxes in 2013. Wall Street will have to wait until mid-February to get a clearer idea, and it’s critical. Consumer spending accounts for as much as 70% of the U.S. economy. If they aren’t spending, businesses aren’t hiring.
“Most consumers didn’t expect their taxes to go up,” said Jim Baird, chief investment strategist at Plante Moran Financial Advisors in Michigan. “There’s no question its going to have a negative impact on spending. It’s going to be a drag.”
Some clues might emerge in a pair of reports on consumer confidence, though. They’ll give an early-bird warning on changes in people’s behavior.
The big ticket
Orders for durable goods — products like aircraft or appliances meant to last at least three years — probably saw a big bump in December.
The reason: Boeing (NYSE:BA) . The jetmaker garnered more than 180 orders for planes in the last month of the year. Airline orders can have an exaggerated effect on the durables data because of the huge pricetag on new planes.
If transportation is stripped out, demand for durable goods was softer though still pretty good. Which means the U.S. industrial sector ended the year in solid but not great shape.
Orders for durable goods is not a sexy category, but it’s a critical component of U.S. growth. Rising sales of autos, planes, computers, furniture and the like signals an improving economy.
The durable figures comes out Monday. A related report later in the week will also shine a light on manufacturers, but no one is expecting the picture to brighten. The Institute for Supply Management’s index for January is forecast to hold steady near the 50% mark.
That means manufacturers are growing — barely.
Fourth-quarter scorecard
On Wednesday, the government is expected to report that the U.S. expanded at a 1.0% pace in the final three months of 2012, according to economists surveyed by MarketWatch.
While that would be a lot softer than 3.1% growth in the third quarter, the details of the latest GDP report could actually show more muscle. The third quarter got a boost from a lower trade deficit, a spike in military spending and an unexpected inventory buildup — companies made more stuff than they could sell.
By contrast, consumers and businesses probably increased their appetite for a variety of goods and services in the fourth quarter, but the gain in spending could be largely offset by falling inventories. Lower inventories subtract from GDP.
Setting aside inventories and foreign demand, the firm Capital Economics suggests that domestic purchases might have hit a two-year peak.
“That would be a remarkable performance given that Sandy hit at the start of the quarter and the uncertainty surrounding the fiscal-cliff negotiations dominated the closing weeks of last year,” economists Paul Ashworth and Paul Dales wrote in a report.
First look at jobs in 2013
The employment report for January, released Friday, is the capstone on a loaded calendar. In the first month of the new year, the economy likely added a net 168,000 jobs, the MarketWatch survey says.
Unemployment is forecast to hold steady at 7.8% — well above the Fed’s 6.5% goal. The central bank plans to continue to pump money into the economy until the jobless rate falls. No change in policy is expected after its meeting.
The level of U.S. hiring each month has been stuck around the 150,000 mark since the beginning of 2011, the by-product of a slowly expanding economy.
Hiring is a classic chicken-and-egg scenario. Companies won’t hire any faster until growth accelerates, but growth won’t speed up unless a lot more jobs are created.
One thing to keep in mind are recent patterns. The U.S. had seen a burst of hiring from October through April in each of the past three years, followed by a spring slump.
The next few monthly reports on hiring should be treated with some caution if there are surprisingly big gains. It might reflect a legitimate uptick in hiring — or the difficulty government economists face in adjusting for seasonal variations.
“There is no question that has played a role,” Baird said. “You have to question whether seasonal adjustments are occasionally making the numbers look artificially better than they should.”
Still, most economists believe job creation should continue to track in the 150,000-plus range based on the current pace of U.S. growth.
There’s even a chance that net hiring could top 200,000 in January, helped by a New Year’s day deal in Washington to avert a budget crisis and ease the worries of businesses and consumers.
“Confidence is a great stimulus,” noted Richard Moody, chief economist of Regions Financial Corp.
