Stephen Stanley, chief economist at Amherst Pierpont, said he expects a much better growth rate of 3.1 percent, and notes the closely watched Atlanta Fed number was based on inventories.
Stanley acknowledges his forecast is higher than other Wall Street economists. "I'm a little more optimistic on housing and equipment spending than they are," he said. "The big story of Q2 is it makes up for Q1." Stanley said consumer spending came back in the second quarter, with consumption gaining 4.5 percent compared with the first quarter's 1.5 percent.
First-quarter growth was 1.1 percent, and economists had been hoping to see growth rebound to a pace of 3 percent or more.
"I think it's going to be weak. I think it's a one handle. I've got 1 percent. The tax receipts were very weak last quarter, job growth slowed and productivity was weak," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank.
"I have a big inventory drag. I have further weakness in capital spending. Everything is sort of on the weaker side with the exception of consumer spending, and that should be up about 4 percent," he said.
Forecasts are fairly wide ranging for the second quarter GDP number, which is making traders nervous in part because of that funky May jobs report. The shockingly weak May employment report, with just 11,000 nonfarm payrolls, was followed by June's report of 287,000 payrolls, allaying some concerns about the labor market.
That soft May report has also been followed by a series of positive surprises in other economic data, including in retail sales and ISM. However, durable goods Wednesday was weaker.
"It's always backward-looking, so we have to understand that," said Peter Boockvar, market analyst with The Lindsey Group, of GDP. "Let's say the Atlanta Fed is right. Then we're looking at first half growth of 1.5 percent."
Boockvar said there are other worrying signs. "I know people expect this second half improvement and maybe it will, but just look at Ford today. U.S. auto sales have been a big lift for the U.S. economy over the past six years, and now it's slowing. It's [GDP] an old number, but I think in a way it's a wakeup call. Let's say we get 2.5 percent. We're averaging 1.8 percent in the first half. It's still a slowing," he said. Ford reported disappointing earnings and said it sees U.S. auto sales slowing in the second half.
"If Ford is right and auto sales are slowing, I don't know what the catalysts are for that second half recovery. Growth is really challenged around the world," Boockvar said.
If the Atlanta Fed is on target, 1.5 percent first-half growth would lag the already slow pace of 1.6 percent over the past four quarters. The government will issue revisions as well, when the second-quarter report is released at 8:30 a.m. EDT. The employment cost index is released at the same time, and there is Chicago PMI at 9:45 a.m. and consumer sentiment at 10 a.m.
The Fed Wednesday upgraded its outlook for the U.S. economy, and noted that consumption and labor were strong. Economists expect the Fed to try to hike rates this year, if the economy is strong enough and financial conditions are calm.
"If the next couple of employment reports surprise to the upside, it really won't matter if second quarter GDP was on the weak side," said LaVorgna.
Traders were expecting markets to react to GDP Friday, but first they were anticipating an easing of policy by the Bank of Japan overnight. There are also stress test results expected for European banks after the Wall Street close.
There are also a number of big earnings Friday, including Exxon Mobil and Chevron.