Not Going to Cut It

Q2 Employment Costs Slow, But Still Advancing at a Troublesome Pace for the Fed

Source: Economics Group of Wells Fargo Bank, N.A.


At first glance, the durable goods data suggest manufacturing continues to defy expectations for a slowdown in activity. But stripping away defense orders and adjusting for inflation suggests activity is cooling. An ugly end to the quarter for core capital goods shipments positions a weaker Q2 for equipment spending than we anticipated, but advanced data on inventories should offset some of that weakness in tomorrow’s Q2 GDP report.

Data Not As Rosy

Durable goods data continue to defy expectations for signs of a slowdown in manufacturing. That’s true at least at first glance. Fresh orders for durable goods rose 1.9% in June, marking the fastest monthly change in six months. That was despite the consensus expectation for a 0.4% decline. Expectations for weakness were broad based among forecasters. In fact, orders were a full percentage point higher than the most optimistic forecaster out of 67 Bloomberg contributions. READ FULL ARTICLE>>