Is the economy getting worse?
It doesn’t look like that, at least based on what we know about this week’s economic data.
The Wall Street Journal polled economists and found that most of them think the job market will grow in a healthy way. It is also expected that the service sector will get better.
But Scott Anderson, who is the chief U.S. economist at BMO Capital Markets, is worried that the U.S. economy is losing some of its air.
A lot of “downbeat data” came out last week, he told his clients. This included a lower estimate for GDP in the first quarter and drops in real disposable income and consumer spending last month.
He said that meant the Fed could still lower rates in September and December.
But Oxford Economics economists only see a slowdown that will get better over time, and they expect GDP growth to pick up again in the second quarter.
Things will get better or worse over time. Here’s what we think the most important economic data will be this week:
May ISM Manufacturing PMI
Monday, 10:00 a.m. Eastern
In April, the ISM manufacturing survey fell below 50, indicating a slowdown. This was followed by a similar decline in the service-sector survey, marking the first time since December 2022 that both were in contraction. Economists predict the manufacturing survey will remain in contraction in May, slightly improving to 49.6 from 49.2 in April.
May ISM Service-Sector PMI
Wednesday, 10:00 a.m. Eastern
Economists expect service-sector activity to expand in May after a month of contraction, with the services PMI anticipated to rise to 50.7 from 49.4 in April.
May Jobs Report
Friday, 8:30 a.m. Eastern
Economists predict strong job growth, with an estimated 178,000 jobs added in May, up from 175,000 in April. Although this is lower than the first quarter’s average of 269,000, it is seen as a more sustainable rate. The unemployment rate is expected to stay at 3.9% for the second month in a row, maintaining below 4% for 27 consecutive months. Wage growth is expected to increase by 0.3% in May, following a 0.2% rise in April, remaining above the level consistent with the Fed’s 2% inflation target.
Q2 GDP
July 25
The government recently revised the first-quarter GDP growth down to 1.3% from 1.6%. David Rosenberg of Rosenberg Research & Associates referred to this as “stall speed.” BMO’s Anderson reduced his Q2 GDP growth estimate to 1.4% from 1.7% and expects 1.3% growth in the third quarter, citing slower income and demand growth. However, regional Fed banks have more optimistic forecasts. The Atlanta Fed’s GDPNow model predicts 2.7% growth for Q2, down from 3.5%, while the New York Fed’s staff estimate has adjusted Q1 growth to 1.8% from 2%.
