Yahoo Finance Get ready for the worst US GDP reading on record: Morning Brief
Thursday, July 30, 2020
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What the worst quarter ever tells us about the economy now.
Later this morning, we’re set to learn that economic growth in the second quarter of 2020 fell by the most on record.
According to a Bloomberg consensus forecast, Wall Street economists estimate the economy contracted at an annualized rate of 34.5% in the second quarter of this year, as lockdowns brought the global economy to a screeching halt.
This data will offer a look back at a period when many businesses were forced to close, tens of millions of workers were laid off or furloughed seemingly overnight, and consumers hunkered down overnight over fears about contracting the novel coronavirus.
On this basis, then, the figures are a look back at a unique moment in economic history, unlikely to be repeated. Seen this way, the lessons in today’s release might be few.
But what we learn about the second quarter will tell us something about the potential trajectory for the economy over the rest of this year — even though this data contains some big question marks and will be subject to revisions in the months ahead.
“Even if the advanced GDP report suggests a bigger second-quarter decline in the economy than we expect, one of two things will follow,” said Steven Ricchiuto, U.S. chief economist at Mizuho Americas. “[Either] the rebound in Q3 will be decidedly stronger, or the second-quarter decline will be tempered by subsequent revisions.”
Ricchiuto expects that today’s release will show an annualized decline in GDP somewhere between 20%-30%, which he calls “less-horrific” than the consensus forecast. But make no mistake: This will be an ugly number.
“What is more important, however, is the markets appear to be looking through the recession to the recovery, and the liquidity provided by the Fed is helping to create confidence by increasing valuations,” Ricchiuto adds.
Writing in a note to clients on Monday, Nicholas Colas, co-founder of DataTrek Research, outlined that while consensus expectations are for a 30%+ decline in growth last quarter, other data suggest a more modest drop-off in activity.
Colas highlighted the New York Fed’s GDP tracker, which as of Wednesday afternoon indicated second quarter growth fell at a rate of 14.3%. He added that labor market data from June that was better-than-forecast, as well as industrial production data, suggested things might not be as gloomy as many on Wall Street think.
“We’re in the camp that thinks Q2 GDP was down 30% but we understand what the NY Fed model is trying to say, namely that there was some economic re-acceleration occurring as the quarter closed,” Colas said.
“The NY Fed model is looking for 13.3% GDP growth in Q3 2020, anchored by the same early June economic reports that lifted its Q2 estimate. Early days for Q3, of course, but that seems reasonable enough,” the analyst added.
Meanwhile, recent data like retail sales, shows that some consumer behavior has returned to pre-COVID trend. Other data including consumer confidence, however, shows a leveling off in economic optimism after robust rebounds in May and June.
Both of which also underscore the need for Congress to continue offering support to consumers and businesses as this recovery continues.
Perhaps this morning’s data will be the reminder lawmakers need about just how grave the economic situation became — and how fragile future growth still remains.
By Myles Udland, reporter and co-anchor of The Final Round. Follow him at @MylesUdland
What to watch today
Economy
8:30 a.m. ET: GDP Annualized QoQ, second quarter advanced print (-34.5% expected, -5.0% prior)
8:30 a.m. ET: Personal consumption, second quarter advanced print (-34.5% expected, -6.8% prior)
8:30 a.m. ET: Core PCE QoQ, second quarter advanced (-0.9% expected, 1.7% prior)
8:30 a.m. ET: Initial jobless claims, week ended July 25 (1.445 million expected, 1.416 million prior week)
8:30 a.m. ET: Continuing unemployment claims, week ended July 18 (16.2 million expected, 16.197 million prior week).
Earnings
Pre-market
6:00 a.m. ET: Cigna (CI) is expected to report adjusted earnings of $5.14 per share on revenue of $38.11 billion
6:25 a.m. ET: Eli Lilly (LLY) is expected to report adjusted earnings of $1.61 per share on revenue of $5.78 billion
6:30 a.m. ET: Newmont (NEM) is expected to report adjusted earnings of 31 cents per share on revenue of $2.38 billion
7:00 a.m. ET: United Parcel Services (UPS) is expected to report adjusted earnings of $1.07 per share on revenue of $17.47 billion
7:00 a.m. ET: Yum! Brands (YUM) is expected to report adjusted earnings of 55 cents per share on revenue of $1.19 billion
7:00 a.m. ET: Comcast (CMCSA) is expected to report adjusted earnings of 55 cents per share on revenue of $23.63 billion
7:00 a.m. ET: ConocoPhillips (COP) is expected to report an adjusted loss of 58 cents per share on revenue of $3.82 billion
7:00 a.m. ET: Sirius XM Holdings (SIRI) is expected to report adjusted earnings of 6 cents per share on revenue of $1.89 billion
7:00 a.m. ET: Procter & Gamble (PG) is expected to report adjusted earnings of $1.01 per share on revenue of $16.97 billion
7:00 a.m. ET: Molson Coors Beverage Co. (TAP) is expected to report adjusted earnings of 64 cents per share on revenue of $2.4 billion
7:00 a.m. ET: Keurig Dr. Pepper (KDP) is expected to report adjusted earnings of 32 cents per share on revenue of $2.82 billion
7:05 am. ET: Kraft Heinz (KHC) is expected to report adjusted earnings of 65 cents per share on revenue of $6.53 billion
8:00 a.m. ET: Kellogg (K) is expected to report adjusted earnings of 94 cents per share on revenue of $3.28 billion
8:00 a.m. ET: Mastercard (MA) is expected to report adjusted earnings of $1.15 per share on revenue of $3.25 billion
8:20 a.m. ET: PG&E (PCG) is expected to report adjusted earnings of 78 cents per share on revenue of $4.11 billion
9:00 a.m. ET: Grubhub (GRUB) is expected to report an adjusted loss of 17 cents per share on revenue of $409.52 billion
After-market
4:00 p.m. ET: Electronic Arts (EA) is expected to report adjusted earnings of 77 cents per share on revenue of $1.06 billion
4:00 p.m. ET: Alphabet (GOOG, GOOGL) is expected to report adjusted earnings of $10.92 per share on revenue of $30.46 billion
4:00 p.m. ET: Gilead Sciences (GILD) is expected to report adjusted earnings of $1.44 per share on revenue of $5.31 billion
4:00 p.m. ET: Amazon (AMZN) is expected to report adjusted earnings of $5.46 per share on revenue of $81.22 billion
4:00 p.m. ET: Expedia (EXPE) is expected to report an adjusted loss of $3.34 per share on revenue of $680.28 million
4:05 p.m. ET: Facebook (FB) is expected to report adjusted earnings of $1.77 per share on revenue of $17.31 billion
4:05 p.m. ET: Ford (F) is expected to report an adjusted loss of $1.15 per share on revenue of $16.24 billion
4:15 p.m. ET: Mohawk Industries (MHK) is expected to report an adjusted loss of 9 cents per share on revenue of $1.87 billion
4:30 p.m. ET: Apple (AAPL) is expected to report adjusted earnings of $2.07 per share on revenue of $52.3 billion
Top News
Amazon, Apple, Facebook, and Google CEOs face 5-hour grilling with mixed results [Yahoo Finance]
Apple CEO Tim Cook hit with questions on App Store dominance during antitrust hearing [Yahoo Finance]
World’s richest man faces Congress for the first time [Yahoo Finance]
Fed chair says economy faces 'new phase' as coronavirus deaths top 150K, data soften [Yahoo Finance]
Experimental J&J vaccine protects monkeys in a single dose-study [Reuters]
Apple Q3 earnings preview: Analysts look to hints of iPhone 12 delays [Yahoo Finance]
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