US GDP to be released at 8:30. Regional US PMI data out later this morning

The US GDP for the 2nd quarter will be released at 8:30 AM.  Last quarter GDP fell by -5.5%  on a quarterly basis annualized.  This was better than the previous quarter when the annualized loss came in at -6.5%.   This quarter the 1st release- which includes some estimated data -is espected to improve smartly to show a -1.5% annualized decline.  The stimulus package, better net trade should contribute.  Inventories are likely to have declined again as auto manufacturers cut production and reduced stockpiles due to slow demand, but this may bode well for future growth as stockpiles are replenished.   The Cash for Clunkers incentive program for the auto industry is expected to boost sales of autos as well going forward.  A decline in GDP will be the 4th decline in a row which is a record going back to 1947.

On the consumption side, the consumer is expected to remain on the sidelines.  The consumer is expected to have slowed purchases by -0.5% versus a +1.4% gain in the 1st quarter. The consumer is still plagued by high umemployment and an increasing savings rate.    The GDP Price Index is expected to show a slower 1.0% gain versus 2.8% in Q1.

The Core PCE for the quarter is expected to show a gain of 2.3% versus a gain of 1.6% last quarter.  This will also be released at 8:30 AM.

Also released at 8:30 will be the Employment Cost index for the current quarter.  The expectation is for a small gain of 0.3% – the same as Q1. Employees have little power in demanding higher wages of course.

Finally at 9:45 and 10AM, the Chicgo PMI and Milwaukee PMI will be released. The Chicago PMI is expected to rise to 43.0 from 39.9 last month.  This would be the  2nd increase in a row and the highest level since September 2008.  The Milwaukee PMI is expected to show a gain to 52 vs 50 last month.   This would be its 5th straight increase and the highest level since December 2007.

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