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Analysts at Nomura suggest that the July Empire State and Philly Fed manufacturing surveys, the first of the month, indicate sustained growth starting out Q3 for the US economy, but a murkier outlook six months ahead.

Key Quotes

“Both general business condition indices in the respective surveys remained well within expansionary territory during July. The Empire State index ticked down to 22.6, above its six-month average of 19.0, while the Philly Fed index increased 5.8pp to 25.7.”

“The details of both surveys were generally positive with elevated readings for new orders, indicating steady near-term momentum.”

“Despite the positive evaluation of the current economic situation, the forward-looking indicators across both surveys remain below their levels from February 2018, before the US steel and aluminum tariffs were announced.”

“Averaging across both surveys, the gap between the forward-looking expectations and the current conditions index has narrowed considerably, consistent with elevated business uncertainty.”

“The narrowing spread between the forward-looking and current conditions indicators corresponds to a noticeable retreat in the capital expenditure expectations indices across both surveys.”