{"id":228276,"date":"2025-08-04T10:15:00","date_gmt":"2025-08-04T14:15:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=228276"},"modified":"2025-08-05T04:04:43","modified_gmt":"2025-08-05T08:04:43","slug":"economic-update-week-of-august-4-2025","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/economic-update-week-of-august-4-2025\/","title":{"rendered":"Economic Update: Week of August 4, 2025"},"content":{"rendered":"\n

Growth<\/h2>\n\n\n\n

The U.S. economy slowed more than expected in 1Q, with real GDP dropping 0.5% annualized after final revisions. Consumer spending rose just 0.5%, with goods up 0.1% and services up 0.6%. Private investment surged 23.8% due to inventory spikes before tariffs, while government spending fell -0.6% due to reduced federal spending. Net exports dragged growth by 4.6% due to a 37.9% import increase. Looking through tariff-related distortions to trade, economic momentum may have been weaker than expected heading into 2Q.<\/p>\n\n\n\n

Jobs<\/h2>\n\n\n\n

The July Jobs report came in much weaker than expected, with sharp downward revisions reminding us that first estimates should be taken with a grain of salt. Nonfarm payrolls rose by 73k (cons. 104k). Moreover, revisions removed 258k jobs from the prior two months, the largest downward revision since 1979 outside of the pandemic. Private payroll employment growth (+83k) slowed but remained dominated by services. The unemployment rate rose 13bps to 4.24% despite a decline in the labor force, while wages rose 0.3% m\/m and 3.9% y\/y. This weak report strengthened the case for a September rate cut, but if unemployment remains stable in August, the Fed may opt to hold rates steady as it deals with tariff-induced price pressures.<\/p>\n\n\n\n

Profits<\/h2>\n\n\n\n

With 70% of market cap reporting, consensus is projecting 2Q25 EPS of $65.21. If realized, this estimate would represent y\/y growth of 7.7% and q\/q growth of 2.4%. Looking at the three main sources of EPS growth, sales, margins and shares are expected to contribute 5.5, 3.1 and -0.8 percentage points, respectively, to y\/y growth. So far, 81% of companies have beaten estimates, and earnings have come in 8.5% above consensus. While we’re not seeing the impact of tariffs yet, management teams are thinking through supply chains, price increases, capex and hiring plans. Tech earnings will be especially important this quarter, as the Mag 7 are expected to contribute 56% of the y\/y earnings growth.<\/p>\n\n\n\n

Inflation<\/h2>\n\n\n\n