Analysts at Nomura offered a review of the US session main data points / FOMC and offered their GDP tracking update.
Key Quotes:
“FOMC meeting: The July/August FOMC statement contained very few changes from the June statement. The FOMC made minor tweaks to its language on economic assessment to reflect strong incoming data. The statement used “strong” to qualify economic activity instead of “solid” in the June statement. This adjustment appears consistent with strong Q2 GDP growth. The statement also indicated that the unemployment rate has “stayed low,” in line with the June employment report. Language on forward guidance and balance sheet policy did not change. The phrase “for now” was not added to the statement despite Chair Powell’s seemingly deliberate use of the phrase to qualify the likely path of policy in his recent semiannual testimony to Congress. However, this is consistent with our view that the Committee will be unwilling to signal changes to its most likely path for policy with such a tweak. Additionally, there was no explicit description of risk from trade policy in the statement. This suggests that trade risk has not yet affected real economic activity enough to specify the risk explicitly. The FOMC minutes will likely provide more information on the Committee’s assessment on trade-related risk to its economic outlook.”
“ADP private employment: ADP reported a 219k gain in private payroll employment during July with a slight upward revision to the June numbers (Nomura: 190k, Consensus: 186k). The strength was broad-based across industry groups with a healthy 42k from goods-producing firms and another 177k from service-providing. The report is consistent with our forecast of a 195k increase in NFP tomorrow (190k from private).”
“ISM manufacturing index: ISM manufacturing index declined 2.1pp to 58.1 in July, the lowest reading since April 2018 and below expectations (Nomura and Consensus: 59.4). The softening likely reflects a combination of tariff concerns and an unwinding of a distorted supplier deliveries index reading from June. The production and new orders indices fell 3.8pp to 58.5 and 3.3pp 60.2, respectively, and together lowered the topline index by about 1.4pp. While still at levels indicating steady business expansion, the declines point to some pullback in the pace of growth. Moreover, respondents overall continued to be concerned about US tariffs and trade policy. The ISM report indicated that, “respondents are again overwhelmingly concerned about how tariff-related activity, including reciprocal tariffs, will continue to affect their business.” The sharp declines in production and new orders during July could be the beginning of further weakening in manufacturer activity in light of increased uncertainty around US trade policy.”
“GDP tracking update: The June construction spending report appears weaker than the BEA’s assumptions for investment in residential structures in Q2. Thus, we initiated a Q2 past-quarter real GDP tracking estimate at 4.0% q-o-q saar, 0.1pp lower than the BEA’s advance estimate. After incorporating the underlying details of BEA’s NIPA accounts as well as incoming data today, our Q3 real GDP tracking is now at 3.2% q-o-q saar.”
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