This week brings the final days of the first quarter of the year and the release of several reports which may confirm that initial fears of an abrupt economic slowdown were overblown. Remember what we were told about the possible economic damage from the federal budget drama, namely the "fiscal cliff," the payroll tax increase and the sequester?
What tax hike?
Consumer confidence and spending have remained intact, despite the expiration of the payroll tax cut at the beginning of the year. While what amounted to a tax hike is taking an estimated $1,000 annually from the pay of someone making $50,000 a year, retail sales haven't seen much of a dent so far.
The Conference Board releases its monthly consumer confidence index at 10 a.m. Tuesday (all times Eastern). It is followed Friday at 8:30 a.m. by the Commerce Department's readings on personal incomes and spending.
"We know we had some pretty good job growth in February," says economist Stuart Hoffman, chief economist for The PNC Financial Services Group. "Retail sales were strong, so I'm looking for a pretty good gain in both income and spending." Hoffman says consumers have withstood the payroll tax increase just fine. He adds that's not to downplay the possible negative effects on certain individuals or defense contractors, for example.
A second revision to the government's estimate of growth in the final three months of 2012 is due at 8:30 a.m. Thursday. You might recall that when the first report was released, it showed a surprising decline of 0.1 percent. It was since revised into positive territory, a gain of 0.1 percent. Hoffman and other economists believe it will be adjusted upward again to an increase of about 0.5 percent.
How are we doing now?
In terms of economic reports, the look at fourth-quarter gross domestic product is ancient history. Want to get real-time? As for the current quarter, Hoffman says he expects growth to come in at between 2 and 2.5 percent. And he thinks that the U.S. economy should continue that pace on through the third quarter of the year. He notes positive trends in the housing market and auto sales helping to keep growth humming along.
Not everyone agrees, of course. Scott Anderson, chief economist with Bank of the West, issued a report saying the growth pace of the coming second quarter will be about half the pace of the first three months of the year. He cites recent data from the outplacement firm of Challenger, Gray & Christmas pointing to a rise in layoff announcements. He thinks job cut announcements will "spike" as businesses react to prospects for reduced government spending in the coming months.
Anderson says other potential causes for concern are a possible slowdown in the housing recovery and a possible pullback in consumer sentiment, which would be a precursor to a drop in spending. In his report, Anderson says until the full impact of the sequester is known -- $85 billion in federal budget cuts -- "the crystal ball into the U.S. economy's future remains a murky one."
To bolster that case somewhat, in its statement this past week the Federal Reserve maintained that risks to the economy continue to be more to the downside. That's why it has continued to keep interest rates at record low levels and continues with its asset purchase program.
Other key reports due this week include the Standard & Poor's/Case-Shiller home-price index, due at 9 a.m. Tuesday, and new home sales from the government that same day at 10 a.m.
This date in business history: Viagra
On March 27, 1998, or 15 years ago, the Food and Drug Administration granted approval for use of the drug Viagra to treat male impotence. It was the first such approval of a drug of this type in the United States. The drug would be launched the following month, accounting for some $400 million in sales in its first three months. Ultimately, it would spawn rival drugs as well as an infinite opportunity for punchlines on late-night television. We're passing on the opportunity to go for such humor here, believing that all of the jokes that possibly could have been made on the subject are already out there.
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