As long as the economy continues to percolate, Americans are showing an insatiable appetite for consumer goods. Torrents of cars, stereos, refrigerators, computers, TV sets, knicknacks, furnishings and items of clothing are streaming into their homes. It’s a self-fulfilling buying circle, underpinned by the most ebullient attitudes in about 30 years. Tuesday’s report on August consumer confidence will afford few indications that the fast spending pace is likely to slow. Economist Diane Swonk, of First Chicago NBD, said the number will hold near 135.4, its level of a month ago, “despite the headline effects of the General Motors strikes, volatile financial markets and the woes that have beset President Clinton.” She added, “Americans haven’t been hit in the pocketbook. Home building is at record levels, measures of spending are booming and, all-in-all, we see a very pretty picture for the U.S. economy.”
DURABLE GOODS
ORDERS STILL SLIPPING
The nation’s manufacturing sector has been slowing all summer, and Wednesday’s report on July orders for durable goods will continue the trend, says Chicago economist Brian Wesbury. “Look for a drop of 0.5 percent, the third monthly decline in a row,” he said. “We’re seeing the impact from Asia on manufacturing exports. We’re also seeing slower corporate profits, which is holding back capital investment.” Wesbury, of Griffin, Kubik, Stephens & Thompson, an investment firm, said employment in manufacturing has been slipping for four months in a row. But the manufacturing slowdown, he added, “is nothing terrible, just a sign of more moderate growth.”
GDP
SLOWER GROWTH?
Economists generally are looking for a slight downward revision Thursday of second-quarter gross domestic product, from the paltry growth rate of 1.4 percent reported earlier. Chicago economist William Hummer, however, expects it to tick up, to a 1.6 percent pace. “The major ingredients, consumer spending and the trade deficit, both did better than expected,” he said. Hummer, of Wayne Hummer & Co., notes that the economy is enjoying a rebound, with third-quarter growth advancing at a 2.8 percent rate. “That’s encouraging, partly reflecting the end of the GM strike, but it still would be the slowest rate of expansion since early in 1997,” he said. “Even so, we’re a long way from any recession. The economy simply has too much momentum.”
STOCK MARKET
RECOVERY LIST
The stock market can recover from its recent sell-off, but only if:
– Global financial markets and currencies stabilize.
– Terrorist attacks against the U.S. can be avoided.
– President Clinton can get off the legal hook.
– Corporate profits can strengthen.
– Interest rates can stay low.
With such a long list of imponderables, many investors have been voting with their feet, seeking a refuge they perceive as safer than Wall Street.
