The third quarter of 2022 for the US economy starts on the right foot with industrial production marking + 0.6% in July compared to the consensus of 0.3%. Strong push from car production which increased by 6.6%, but even excluding this key component, production increased by 0.3%. “This report provides further evidence that Q3 GDP is expected to be good,” said James Knightley, Ing Chief International Economist. We strongly suspect that consumer spending will be propelled by the increase in cash flow caused by the collapse in gasoline prices and employment gains, trade will also be supportive, inventories minus a drag and we now know the manufacturing sector is going. recovering. Putting all of this together, we think an annualized growth of 3% is firmly at stake ”.
The concern is what happens in the 4th quarter. Yesterday’s NY Empire manufacturing survey was dire indicating much weaker orders and activity over the course of the year. “We will be watching closely if this is replicated in the Philly Fed (Thursday), Richmond Fed (August 23) and others later this month,” notes James Knightley. “Even though it is seen as an aberration, there are many reasons to expect weaker activity towards the end of the year. China’s slowdown and recession in Europe will weigh heavily, while continuing interest rate hikes and the prospects for a deterioration in the housing market will also act as a major obstacle ”.