Trade sector was likely a neutral factor in 16Q2 GDP. Brexit may be stumbling block near-term, but export prospects still looking up. US exports to China have picked up noticeably this spring. NMI 16Q2 clear improvement over 16Q1. Brexit not a disruption.
AbstractToday’s data, particularly the May trade report, was pre-Brexit. Nonetheless, these reports argue that the U.S. is well-positioned to ride out the storm in Europe (and FMI continues to expect that storm to settle down to the proverbial tempest in a British teapot). U.S. exports have been firming. ISM surveys, both manufacturing and non-manufacturing, showed that export orders improved noticeably last quarter. Brexit may present a stumbling block near-term, but we believe the export picture will show further improvement by year-end. For 16Q2, net exports are on track to be a neutral factor for real GDP. FMI is tracking almost +2.5% real growth for the quarter. We also note that the NMI June results completely erased the weakness in its May survey, including in jobs. While purchasing manager surveys have not been particularly good predictors of payroll gains in this cycle, we take this as a good omen that May’s jobs “nightmare” will also become a distant memory after Friday’s June employment report (FMI’s complete employment preview will be released Thursday, as usual).