More Color on the Economy from AA's Q2 Results Due Monday?

Alcoa (AA), what many refer to as the bellwether of the economy, is reporting its Q2 earnings tomorrow after the close.  As posted in Q1, we created a simple model for projecting annualized GDP growth rate per quarter by taking AA's top-line performance into account, as the EPS results can be very misleading.  Based on the average of published analysts' estimates, AA is expected to report Q2 revenues of $5.81bil, which is nearly a 12% Y/Y decline.  The estimates range between $5.58bil and $6.07bil.  Based on the average estimate, we could say that Q2 real GDP annualized growth rate will be around 1.25%.  The min, max, and median estimates indicate possible Q2 GDP growth rates of 0.81%, 1.27%, and 1.80%, respectively.  Unfortunately, it appears that even if AA meets the expectations of the most optimistic analyst out there, Q2 GDP growth may come in below the Q1 1.9% growth rate.

We must say that the manufacturing and services ISM data for Q2 indicate a possible negative GDP growth rate.  While some of the negative data to which we have pointed the last few months may be offset by better than expected performances in residential fixed investments and housing services, chances of a slowdown in Q2 GDP growth remain very high.  We are not projecting a housing recovery, but any slight change in the positive direction within this battered down industry will likely have a positive impact on GDP growth as the two that we mentioned account for approx. 15% of real GDP.

As they say, first things first; let's see what Q2 numbersAA will put out there tomorrow after the close.