The economy has been in a gala mood through much of this year, with a crowd of officeholders in Washington gleefully wear-ing the lampshade. Yet the nation’s manufacturing sector sits glumly near the punch bowl. Reports show softening not only for exports, but in the key category of business capital spending. Chicago economist Brian Wesbury says Friday’s report on July orders for durable goods will show a downtick of 1.2 percent, the second month in a row that orders have declined. But Wesbury, of Griffin, Kubik, Stephens & Thompson, an investment firm, says that still would leave orders significantly above the year-earlier level. “The economy appears to have slowed a bit, but it is still growing moderately,” he says. Which means Americans can party on, right into this fall’s elections.
Maintaining status quo
As recently as a month ago, Tuesday was expected to be a red-letter day. Economists were nearly unanimous that the Federal Reserve Open Market Committee, which sets the tenor of short-term interest rates, would bump them skyward. But, thanks to a series of sluggish statistics, the experts now are nearly unanimous in the other direction: Fed policymakers will do nothing. Chicago banker Kenneth Skopec says there is a possibility the Fed will boost rates, but not until after the election. Skopec, president of Mid-City Financial Corp., says an immediate concern for policymakers must be “the huge growth in consumer lending and credit card debt.”
No way around it
Government officials rarely point with pride to the massive and growing trade deficit, and Tuesday’s report on the shortfall for June is unlikely to provide anyone with a place to hide. In May, the global gap widened to $10.9 billion, up nearly $1.3 billion from a month earlier. Analysts blamed car dealerships stoking up supplies of imports for this fall’s new model rollouts, as well as yet another surge in goods from China.
Hardly a ripsnorter
Second-quarter earnings reports for the nation’s retailers continue to come out, with giant Dayton Hudson Corp. scheduled to provide numbers Tuesday. In general, discount- and department-store results depict a slow-growth economy, hardly the ripsnorting activity indicated by the government’s 4.2 percent growth rate for gross domestic product. But Wall Street analysts are warming to retailers’ prospects going into the holiday shopping season. Last week’s most dismal earnings news emanated from J.C. Penney Co., which reported its quarterly profit fell nearly 20 percent, depressed by a stunning rise in write-offs forced by customers’ personal bankruptcies and delinquent payments.
Rolling out talks
It has been an unusually cool summer in Detroit, at least when it comes to rhetoric between the United Auto Workers union and the Big Three automakers. All that could change Thursday, however, when labor leaders meet to announce a target company for critical contract negotiations; the current agreement expires Sept. 14.
Excitement ahead?
With two weeks to go until Labor Day, the stock market still has seen no sign of a meaningful summer rally. Major measures of the market continue to slump anywhere from 1 to 8 percent below their levels of Memorial Day. Speculative issues are even worse off, says Richard Evans, an investment adviser in suburban Flossmoor. He notes that some barometers of higher-risk issues remain nearly 15 percent below their recent highs. Because September and October are traditional periods of nervousness, Evans says, “we could soon see some of these speculative stocks create additional excitement–on the downside.”
