Economic Data Comes in Strong as ADP, GDP Post Huge Double-Beat: July 30, 2025

This morning’s economic data was terrific as a solid rebound in second-quarter activity was accompanied by a surge in cyclical hiring to begin the subsequent quarter. The monster double-beat consisting of the strongest rate of GDP progress since the middle of last year coinciding with the fastest pace of job gains since March is signaling reaccelerating economic conditions and a wider path for corporate earnings growth. But the international trade front is becoming incrementally tense, as President Trump declares that this Friday’s tariff deadline won’t be extended for a double-digit number of nations that have yet to sign a deal with Washington. However, a decision has not been made on Beijing, although a reprieve is widely expected. Meanwhile, the Commander in Chief has imposed 25% levies on New Delhi, citing the nation’s elevated duties, heavy barriers to commerce and its reliance on Moscow for energy supplies and military equipment. In trading action, interest rates and the dollar are soaring on the back of this Wednesday’s important data points exceeding projections by wide margins. Equities are achieving modest increases though, as investors await this afternoon’s Fed meeting with bulls hoping that the printed materials and the Powell presser will include evidence supporting a September benchmark reduction. Traders are also scooping up volatility protection instruments ahead of the monetary policy event as well as Meta and Microsoft profit reports after the close followed by Amazon and Apple tomorrow. Elsewhere, forecast contracts are getting bid while the commodity complex ex crude oil is facing selling pressure and bitcoin slides modestly.

Second Quarter GDP Beats Expectations

Economic growth rebounded strongly throughout the second quarter, posting its fastest pace of advancement since last year’s third quarter. Real gross domestic product (GDP) progressed 3% on a seasonally adjusted, quarter-over-quarter, annualized basis, exceeding the 2.4% median estimate and countering the 0.5% contraction during the first three months of 2025. The gain was driven by positive contributions from consumer spending, business investment, municipal expenditures and net exports. Residential capital projects and federal government debits sported minus signs though, as elevated financing costs continue to plague the real estate sector while the Trump administration’s budget cuts drove a back-to-back decline in government outlays. Turning to the significant consumption segment, which comprises the majority of GDP, folks ramped up shopping on durable goods and services while nondurables experienced a deceleration.

Cyclical Hiring Accelerates Strongly

Private sector hiring this month accelerated to the fastest pace since March, according to payroll processing firm ADP. The gains were carried by a broad-based cyclical tilt, shifting from the past few years when employment additions were dominated by non-economically sensitive sectors. The 104,000 headline figure was much better than the 75,000 expected and June’s loss of 23,000. The advancement was contained by a drop of 38,000 in the education and health services category. All other segments added, however, with leisure/hospitality, financial activities, trade/transportation/utilities and construction boosting rosters by 46,000, 28,000, 18,000 and 15,000. The remaining components experienced climbs ranging from 2,000 to 9,000. Additionally, small, mid-sized and large establishments propelled payrolls by 12,000, 46,000 and 46,000. Paycheck growth was quite steady, with the year-over-year (y/y) change in annual wages unchanged at 7% for job changers but ticking down 0.1% for stayers to 4.4%. 

Pending Home Sales Weaken

Pending home sales declined last month as elevated mortgage rates and pricey properties overwhelmed the benefits of improving inventory. The headline figure retreated 0.8% month over month (m/m), worse than the 0.3% projected and May’s 1.8% increase. The West, Midwest and South experienced decreases of 3.9%, 0.8% and 0.7% while the Northeast sported a gain of 2.1%. Contract signings typically occur 30 days before keys are exchanged financing agreements are finalized and serve as a leading indicator to completed transactions.

Core Goods Comprise Roughly 20% on CPI

When examining the inflation picture and the overall economy for its sensitivity to tariffs, an important consideration is that our landscape has shifted from physical products to services. The transition has made the US increasingly insulated to friction as it relates to cross-border commerce expenses, meaning that trade’s influence on price pressures has been significantly reduced. With cost forces in the mid 2s and the upper-end of the Fed’s benchmark at 4.5%, monetary policy is heavily restrictive at this juncture. And despite economic figures being strong this morning, a quarter-point reduction or two here is more of a mid-cycle adjustment rather than the continuation an outright easing cycle. Finally, June’s projections from the institution pointed to two trims by year-end and the July meeting is an opportune time to communicate a widening of the passage for a September reprieve.

International Roundup

Bank of Canada Maintains Overnight Rate

The Bank of Canada (BoC) this decided this morning to leave its key overnight rate unchanged at 2.75% as expected by economists. Among policymakers, the decision was supported by a strong consensus. BoC Governor Tiff Macklem said some tariff deals have been reached with the US, but the agreements illustrate that the country’s southern neighbor is not embracing open trade. He added that US tariffs are highly unpredictable, making it difficult to provide a forecast for the Canadian economy. Inflation is likely to range from 0% to 2% and even though tariffs will impose new direct costs, upside and downside price pressures are roughly balanced. 

Euro Area GDP Exceeds Expectations

The euro areas GDP grew 1.4% y/y and 0.1% quarter-over-quarter during the three-month period ended in June, according to Eurostat. The results moderated from 1.5% and 0.6% in preceding prints but exceeded economist consensus estimates of 0% and 1.2%.

Euro Area Sentiment Climbs

Stronger expectations for industry, services and retailing and a more upbeat mood among households pushed overall euro area confidence to a five-month high this month, according to the European Commission’s Economic Sentiment Indicator. The gauge climbed from 94.2 in June to 95.8 in July, exceeding the economist consensus estimate of 94.5.

Employment expectations, however, were roughly unchanged, climbing 0.3 points to 97.5 and both metrics remained below the long-term average of 100.

The industry benchmark advanced 0.9 points due to better assessments of current order books and improved production expectations. The survey of services providers also climbed, gaining 0.7 points. Managers cited strong demand expectations and had improved views of past conditions. In the retail-trade sector survey, which was 0.8 points higher, respondents cited an improved view of future businesses opportunities, which offset a weak evaluation of past conditions. Consumers, meanwhile, displayed increased intentions of making major purchases and had loftier views of past and future financial situations.

Singapore Leaves Monetary Policy Unchanged

Singapore officials left the island-nation’s monetary policy unchanged this morning. The policy, established by the Monetary Authority of Singapore, (MAS) involves maintaining the Singapore dollar nominal effective exchange rate (S$NEER), which is a range in which the country’s currency trades relative to the US dollar. In a statement, the MAS explained that trade and global goods production has been stable after the organization eased its policy in April. That change followed a similar action in January. The MAS also noted that economic growth has been stronger than previously anticipated. Meanwhile, price pressures have been benign due to softening consumer spending and low inflation for imported and domestically produced items. The MAS, however, warned that tariffs could impact the performance of export-focused sectors and that the economy faces significant uncertainty.

Also this morning, the Singapore Ministry of Manpower reported that its unemployment rate ticked northward from 2% in the first three months of 2025 to 2.1% during the second quarter. The country’s unemployment rate hasn’t exceeded that level since early 2022.