Americans’ confidence in their futures can be described as robust and full-bodied, not unlike a tall draft of premium beer. But economists, ever fearful, continue to look for signs that the brew is going flat, or that there is too much froth and not enough lager. Tuesday’s report on May consumer confidence is likely to show slight slippage, to around 135.5 from 136.7 a month earlier. That’s the prediction of Chicago economist Diane Swonk, who says a minor pullback is natural “because there are signs we are moving toward a bit of a slowdown. There also are unsettling headlines about the situation in Asia.” But Swonk, of First Chicago NBD Corp., said “consumer attitudes remain quite buoyant, fueled by rapidly growing incomes and a very strong job market.” It is difficult to anticipate that consumer confidence will weaken, she said, “when an entry-level worker at McDonald’s can expect to get $8 an hour plus benefits.”
GROSS DOMESTIC PRODUCT
FED LOOKS FOR SLACK
Members of the Federal Reserve will be carefully scrutinizing Thursday’s revision of first-quarter gross domestic product for evidence the economy is slowing from a 4.2 percent annual growth rate. Members of the Fed view such rapid expansion as unsustainable, but are counting on softening exports, which are creating a record trade shortfall, to throttle back activity. But Chicago investment adviser William Hummer says this report won’t confirm the Fed’s hopes. “The revision will show growth actually at a 4.5 percent rate, because of very strong consumer spending, as well as a buildup in inventories,” said Hummer, of Wayne Hummer & Co. “This means members of the Fed still will face a need to boost interest rates when they meet in early July.”
DURABLE GOODS
ORDERS LANGUISHING?
Economists at BancAmerica Robertson Stephens in San Francisco are looking for April orders for durable goods, due Thursday, to show a jump of 1 percent, lifted by aircraft orders and military goods. Nonetheless, they say in their latest report, “The underlying trend in orders has languished, reflecting the slowdown in manufacturing for exports and inventories.” Other reports due out include April existing-home sales Tuesday and the month’s personal income and spending Friday.
STOCK MARKET
SUMMER RALLY ON HOLD
Stock market investors are beginning to anticipate a summer rally, but so far the action has been tame. The Asian meltdown has created a higher-than-usual wall of worry for Wall Street. Corporate profits, which grew by only 3 percent in the first quarter, are making scant headway this quarter. With no major earnings reports due for more than a month, analysts believe any big gains in stock prices may need to wait until after July 4, when second-quarter results begin rolling out. Meanwhile, stock, bond, commodity futures and options markets, government offices, banks and many businesses are closed Monday for Memorial Day. The weekly auction of short-term Treasury bills will occur Tuesday.
