Atlanta Fed Boosts its View, but We're Not So Sure
The details of the June ISM report suggest a weaker start to the current quarter.
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*The Atlanta Fed’s GDPNow Model boosted its view on 2Q 2024 GDP, but we were less impressed with the Fed-friendly June employment report.
*Recent June new order PMI data from ISM point to a softer start to the current quarter
*The market’s next hurdle to clear remains the June quarter earnings season
Earlier this week, we shared we would be rather interested in the next update for the Atlanta Fed’s GDPNow 2Q 2024 model following its post-June PMI drop to 1.5%. It’s out with the figure upped to 2.0%, with the biggest data point behind the revision being the June employment report. While the headline figure did beat expectations, several below-the-headline items supported the slowing economy narrative, making it Fed friendly for eventual rate cuts.
Despite that upward revision, if we examine the trend line in recent PMI reports from ISM and contracting order data found in its June PMI reports, it points to the current quarter starting off on a weaker note than the June quarter.
- June non-manufacturing PMI new orders slid to 47.3 from 54.1
- June manufacturing PMI new orders clocked in at 49.3, the fourth consecutive month below the expansion-contraction line at 50.
Because we have yet to get June data for retail sales, industrial production, housing starts and several inflation figures for the month as well, we’re not quite ready to call 2Q 2024 GDP figures rearview-facing ones just yet. However, the market’s focus will soon turn to GDP prospects for the September quarter and how they compare to the June and March quarter. The cadence across those three quarters will be the focal point and the picture it paints could help the market and the Fed become more comfortable with rate cuts.
Because we won’t get the first pieces of 3Q 2024 data until early August, as we discussed earlier today, we continue to think the next hurdle for the market will be the June quarter earnings season and EPS growth prospects for 2H 2024
At the time of publication, TheStreet Pro Portfolio had no positions in any securities mentioned.
