US data reviewed and GDP tracking update raised - Nomura

Analysts at Nomura offered a breakdown of the key US data from overnight.

Key Quotes:

"ADP employment report: The ADP employment report for August indicates that private employment increased 237k during the month (Nomura: 200k, Consensus: 185k). Strength was broad-based across goods-producing (+33k) and service-providing (+204k) industries. Overall, today’s ADP data support our employment report forecast for Friday for a 205k increase in nonfarm payroll employment from the BLS (200k from private payroll employment and a 5k contribution from the government). 

Q2 GDP, second estimate: In the second estimate of Q2 real GDP growth, the BEA raised its estimate by 0.4pp to 3.0% q-o-q saar from its advance estimate, mostly in line with expectations (Nomura: 2.9%, Consensus: 2.7%). Solid topline Q2 real GDP growth suggests an economy growing above trend in the near term. Much of the upward revision was concentrated on personal consumption, which was raised by 0.5pp to 3.3%. This revision was likely a reflection of the advance release of the Q2 Quarterly Services Survey and upward revisions to back months in core retail sales. Private fixed investment was revised upwards to 3.6% with broad-based upward revisions to its subcomponents. Specifically, investment in intellectual property was revised up strongly by 3.5pp to 4.9%. Moreover, structures and equipment investment increased at a solid pace. Inventory investment was relatively subdued in Q2 despite a modest upward revision. Inventory changes contributed only 0.02pp to top-line growth in the second estimate, which subtracted 0.02pp in the advance estimate.

GDP tracking update: The BEA’s second estimate of Q2 real GDP growth and its components were mostly in line with our expectations. However, a contribution from net exports to Q2 top line growth was stronger than we expected. Imports and exports were both lowered in the second estimate, but the pace of growth in exports appears to have been intact. Therefore, we think there may be greater momentum going into Q3 in net exports. After rounding, we raised our Q3 GDP tracking estimate by 0.1pp to 3.3%."