Tonight we get the first estimate of US second quarter economic growth and the news is not expected to be convincing.
Growth estimates from confused American economists range from around 1.3% to 2.5%, with consensus at around 1.9% (all annual rates), or unchanged from the weak first quarter.
As well there will be significant revisions for US GDP going back to 2003 which could help re-write the growth up to 2007 and the depth of the slump from last 2007 to June 2009.
The outlook for the economy and expectations for the GDP report tonight were undermined by the release this week of the Beige Book of economic anecdotes from the US Federal Reserve, ahead of its meeting starting August 9.
This flood of data though is likely to be swamped by the growing fear about next Tuesday night (our time) deadline for the US debt ceiling and the spending and deficit reduction talks.
The impasse in Washington is terrifying markets in the US and around the globe.
What is worrying, scary even, is the oblivious, almost arrogant headlong pursuit of spending cuts by the hard right of the Republican Party, without a glance at the impact a default and/or downgrade of the US would have on its own finances and the rest of the world.
Small-minded purity of cause is no substitute for hard-headed agreement on a spending cuts/ higher debt package, as well as a significant lift in the debt ceiling that would take it past the 2012 elections in November of that year and away from the swamp that masquerades as American politics.
We all hope the Americans are not as stupid as they look at the moment as they try to do a deal on spending cuts and a higher debt ceiling that will allow the world’s biggest economy to escape default at least.
Whether any deal will be enough to escape a credit rating downgrade is too hard to call.
With jobless numbers rising now since May and the unemployment rate at 9.2%, the highest in a year, the stakes are high for Americans.
A slump into recession in the US economy won’t be of great importance for us in Australia, so long as China continues growing, as it will.
But a default and or credit downgrade for the US would damage the entire global financial system and economy in ways that no one can be certain of at the moment: we are in unchartered waters, hence the rising level of fear in markets.
If there is no agreement next Tuesday, our time, and then into the night, markets will be paralysed.
Whatever happens, it’s quite possible the slowing US economy could be stopped in its tracks.
And the economy is slowing, as the Fed reported this week.
The Beige Book, which is based on information collected on or before July 15, said growth has slowed in eight districts, particularly those nearest the Atlantic seaboard, with the Minneapolis district in the Midwest hurt by the just ended state government shutdown.
The Beige Book shows the performance of all 12 districts was poorer than the previous survey, as the previous report showed a slower growth rate for four districts, seven districts growing at a steady pace, and one district with faster growth.
Consumer spending increased overall, with modest growth of non-auto retail sales in a majority of districts, but price pressures from food, energy, cotton and other supplier inputs continued to squeeze retail margins.
Activity among non-financial service sectors improved overall in most districts. The manufacturing outlook remained generally optimistic, but capital spending plans were more cautious.
Residential real estate activity was little changed and remained weak, though construction and activity in the residential rental market continued to improve since the previous Beige Book.
Most districts observed modest hiring increases, but labor market conditions remained soft, said the Fed.
“Economic activity continued to grow,” the Fed said. “However, the pace has moderated in many districts.”
The Fed districts reporting slower growth included New York, Philadelphia, Boston, Atlanta, Richmond, Cleveland, Dallas and Minneapolis.
And, the US Commerce Department said orders placed with American factories for durable goods unexpectedly fell 2.1%.
That suggests companies were losing confidence in the recovery as the second quarter ended.
Marketwatch says its survey of economists has growth at 1.6%.
Bloomberg reported that Goldman Sachs, JPMorgan Chase & Co. and Bank of America Merrill Lynch say the economy will grow at a 2.5% in the third quarter, down from earlier projections of as much as a 3.25%.
