Americans’ confidence in the future remains unshakable, thanks to a record economic expansion that is closing in on 10 years in length. Nothing can dampen the sky-high mood–not oil approaching $40 a barrel, a half-dozen rate hikes by the Federal Reserve, nor the doubts created by a lackluster political campaign season. Expect more of the same Tuesday, with the report on September consumer confidence. Economist Tim O’Neill looks for the index to hold very near the level of a month earlier, at 141.1. “The economy is still robust, and consumers have plenty of reasons to be rationally exuberant,” said O’Neill, of Chicago’s Harris Bank and its parent, Bank of Montreal. He said a strong labor market and solid income growth mean “we are not likely to see any significant deterioration in attitudes.” While the coming election will do little to create gloom, he said, “the high cost of oil could start to hurt confidence.”
GROSS DOMESTIC PRODUCT
EXPORTS A LETDOWN
A final revision of second-quarter gross domestic product, due Thursday, is not expected to wander far from the 5.3 percent annual growth rate reported earlier. Of greater importance will be analysts’ estimates of how much growth has slowed over the last three months. Chicago economist William Hummer is looking for expansion in the current quarter at only a 3.3 percent rate, due in part to disappointing sales of exports. “The trade situation still is deteriorating, and it will be a big drag on the number,” said Hummer, of Wayne Hummer & Co., an investment firm. The overall economic slowdown, however, is not as steep as analysts were expecting, he said: “Consumer spending has faded, but it hasn’t collapsed, and the housing industry, while numbers are somewhat erratic, remains strong.” Hummer believes growth for all of 2000 will be a robust 5 percent, creating a chance that the Fed could again boost rates. Although he sees zero likelihood of action occurring when policymakers gather in eight days, he thinks there is a modest chance–less than 50 percent–of a rate hike at their Nov. 15 meeting.
EXISTING HOME SALES
WATCH FOR SLOWING
Other items on the agenda include August existing home resales Monday, the month’s orders for durable goods Wednesday and personal income and spending Friday. Watch the housing numbers, because of considerable disagreement over whether a slowdown in the real estate industry is meaningful, or just a temporary blip.
EQUITIES
TRANSPORTS KEY INDICATOR
The stock market is nearly finished with its quarterly hike across burning embers, better known as corporate confession season. Perhaps surprisingly, although earnings warnings have been only a bit more scary than usual, the faint of heart have shown themselves quick to run for the exits. Flossmoor investment adviser Richard Evans said a largely overlooked aspect of the market is the weak performance of airline, trucking and railroad stocks. He said last week’s drop in the Dow Jones transportation index “has very bearish implications for the rest of the market. It has become the vogue on Wall Street to dismiss the transports as `untech.’ However, they still are an important cyclical indicator.”
