US: Focus on trade balance and factory orders – Nomura

Research Team at Nomura, expects US nominal exports to grow moderately in July while imports look essentially unchanged over the month.

Key Quotes

“As a result, we forecast a modest improvement in trade deficit in July to -$43.1bn from -$44.5bn in June. Our forecast is subject to revision when the advance report on the goods trade balance is released on Friday 26 August.

Factory orders: Durable goods orders increased by 4.4% in July in the preliminary estimate, beating market expectations. The better-than-expected headline number was driven by a strong positive reversal in transportation orders, which increased by 10.5% in July after falling by 11.4% in June. Excluding transportation, orders increased by a solid 1.5% which is a good sign that business spending on capital goods should increase in the coming months.

Although orders picked up, July shipment data suggest business spending was weak to start Q3. Core capital goods shipments declined by 0.4% in July following a revised -0.5% in June (previously reported as -0.2%). But on the flip side, weaker shipment activity appears to have pushed up factory inventories, as they grew by 0.3% in July—the first increase in 2016. Next week’s factory orders report will include the final estimate of durable goods manufacturing orders, shipments, and inventories, along with the comparable nondurable goods manufacturing components. Consensus expects a 1.7% increase in factory orders in July.”