After a dull stretch, the U.S. economic dashboard will alight anew this week, with the first estimate of second quarter gross domestic product, a meeting of the Federal Reserve's policy committee, and a fresh survey of hiring.
While all of Wall Street will be watching, few are expecting any surprises. Nevertheless, all three calendar items will fuel more debate over when the Fed will begin a slow reversal of its $85-billion-a-month bond-buying program. Guesses currently range between September and early next year.
It took several weeks, but investors finally seem at ease with the Fed's revised policy stance.
Last month, chairman Ben Bernanke told a press conference that if the economic outlook held, policy makers could slow their monthly purchases of bonds later this year. Turmoil ensued, forcing Mr. Bernanke to use his next public appearance to assure investors that the Fed was in no hurry to tighten policy. Stock markets righted themselves, and now are back at record levels. The Fed has little reason to create fresh waves when it releases a new policy statement on Wednesday.
Before the Fed concludes its meeting, the government will release its initial estimate of second-quarter economic growth.
The number likely will be uninspiring. Tom Porcelli at RBC Dominion Securities in New York expects growth at an annual rate of only 0.9 per cent. So does IHS Global Insight. That would be a significant slowdown for the 1.8 per cent rate posted in the first quarter. The expected slump reflects a large fiscal drag from budget cuts in Washington, which took hold in the spring.
Yet so long as the GDP figure comes in around expectations, it shouldn't rattle markets too much. The second quarter ended in June and forecasters have moved on. The headwinds from fiscal policy should fade as the year goes on, although Mr. Bernanke conceded this month that the effects of Washington's "sequester" are hard to predict. Still, most economists expect a much stronger second half.
Much of that optimism is based on growing evidence that hiring is entrenched. President Barack Obama crowed last week that private-sector job growth is the fastest this year than over any similar period since 1999. Non-farm payrolls expanded by 195,000 in May and June, and Wall Street analysts think hiring will again flirt with the 200,000 mark in July. The Labour Department releases its latest jobless survey on Friday.
With economists comfortable with their reads on the future, they may this week spend some time assessing the past.
The GDP figures on Wednesday will be derived from new measurement techniques, including new categories. For the first time, the Commerce Department will assign separate values for research and development and intellectual property. The new approach will be applied to historical data, and economists estimate that the level of GDP could be reported as $400-billion (U.S.) higher than previously thought.