Export Data Insights - In July, dollar-denominated exports increased by 7.2% year-on-year, while imports rose by 4.1%, both significantly exceeding expectations and reaching new highs since May 2025 and August 2024 respectively[11] - The strong export performance is attributed to four main factors: low base effect, robust exports to non-US economies, a surge in transshipment activities, and the restructuring of supply chains leading to increased demand for capital goods[3] - From a price perspective, refined oil (+0.82%) was the main driver, while mobile phones (-0.42%) and steel (-0.21%) were the main constraints; in terms of quantity, automobiles (+0.61%) were the primary driver, while refined oil (-0.84%) was the main constraint[34] Global Economic Context - The global manufacturing PMI fell to 49.3 in July, indicating a contraction in the manufacturing sector and a lack of reversal signals in the global manufacturing cycle[39] - The US market is a critical variable affecting external demand; a slowdown in US demand could lead to a downward shift in global export growth rates[43] - Recent US data indicates that tariffs have impacted corporate capital expenditures and employment demand, increasing the probability of an economic recession in the US[43] Inventory and Trade Dynamics - Unlike previous cycles, US wholesalers and retailers are experiencing declining inventory levels, with inventory-to-sales ratios at 1.30 and 1.31, below the central levels of 2023-2024[58] - The current inventory accumulation is likely occurring at the consumer level rather than the corporate level, suggesting a longer adjustment period when the cycle reverses[58] Risks and Uncertainties - Domestic policy effectiveness may fall short of expectations, and international geopolitical developments could introduce unexpected changes[63] - There is a potential for measurement errors in monthly import and export growth rates due to various variables in the models used[63]

Group 1 - The article discusses the sudden shift in attitudes from the EU and Japan towards the US, particularly in the context of trade agreements and investment commitments made by President Trump [3][4][6]. - Japan initially promised to invest $550 billion in the US, primarily for chip development and energy procurement, but later clarified that this amount was merely a potential interest from private companies, not a government commitment [6]. - The EU also made a similar promise of $600 billion for energy purchases, which was later retracted, indicating that the funding would depend on private sector decisions rather than government funding [6][15]. Group 2 - The article highlights Trump's reliance on verbal commitments from allies, which have proven to be unreliable, leading to a perception of him being manipulated by foreign leaders [6][16]. - The US economy is facing significant challenges, including rising inflation, declining consumer spending, and a soaring national debt of $36 trillion, with daily interest payments of $2.5 billion [15][16]. - The article suggests that Trump's policies, including tariffs and tax cuts, have not yielded the intended economic benefits and have instead exacerbated the country's financial issues, leading to a loss of trust in US economic data and governance [12][15][16].

1. Report Industry Investment Rating No information about the industry investment rating is provided in the report. 2. Core Viewpoints - The downward revision of non - farm data from May to June may accelerate the Fed's interest - rate cut rhythm. As of now, the probability of a "compensatory" rate cut by the Fed in September is limited, and the focus is on trading rate cuts rather than recession. The non - farm data may impact the data - based investment research and analysis system, and the value of gold may be further highlighted [1]. - The Fed's action may be too late. After the release of non - farm data, the market's expectation of a 25BP rate cut by the Fed in September soared from 37.66% to 80.31%, and it fully priced in at least one 25BP rate cut by the Fed before October [2]. - Based on current data, it may not be sufficient to drive the Fed to conduct a "compensatory" rate cut. If the labor market deteriorates further in August and inflation rebounds moderately or declines again, the Fed may make a more accommodative monetary policy decision [3]. - The data - based investment research and analysis system will be continuously impacted. In the short term, ADP employment data may serve as a substitute for non - farm data. In the long term, the issue of data credibility may ferment, affecting the pricing of financial assets, while the value of gold may be further emphasized [4]. 3. Summary According to the Table of Contents 3.1 Analyzing the Underlying Logic of the Significant Downward Revision of Non - farm Data - **July Non - farm Data**: In July, the US added 73,000 non - farm jobs, lower than market expectations. The unemployment rate rose to 4.2%, indicating a marginal cooling of the labor market but still with some resilience [11]. - **Downward Revision of May - June Non - farm Data**: The total non - farm employment in May and June was revised down by 258,000. The adjustment rates in May and June reached 86.33% and 90.48% respectively, the largest since 2021. Both the private and government sectors showed a general decline [14][15]. - **Impact on the Fed's Decision - making**: From May to July, the average monthly increase in non - farm employment was only about 35,000. If the Fed had seen the revised data before the meeting, more officials might have supported a rate cut in July. After the data release, the market's expectation of a Fed rate cut increased significantly [21]. - **"Compensatory" Rate Cut**: The current situation is similar to that in the third quarter of 2024 in that the weakening labor market boosts rate - cut expectations. However, the current inflation environment may restrict the Fed's rate - cut decision. As of now, it may not be enough to trigger a "compensatory" rate cut, but there is a potential path [25][27]. - **Trading Focus**: After the non - farm data release, the stock market adjusted significantly. The US economy shows a marginal weakening of growth momentum rather than an impending recession [31][35]. - **Impact on the Investment Research System**: In the short term, ADP employment data may gain more attention. In the long term, the credibility of non - farm data may be questioned, adding uncertainty to the financial market, while the value of gold may increase [35][37].

Group 1 - Trump indicated that Vice President Vance is the "most likely" successor for the 2028 Republican presidential candidate [1][2] - Trump suggested a potential ticket pairing of Vance and Secretary of State Rubio for future elections [2] - Moody's chief economist warned that recent indicators show the US economy is on the "edge of recession," with a weakening labor market and shrinking construction and manufacturing sectors [2] Group 2 - Multiple international financial institutions warned that investors should prepare for a decline in US stock prices due to high valuations and deteriorating economic data [2] - Deutsche Bank analysts noted that the US stock market faces short-term downside risks [3] - Morgan Stanley's analyst projected that the S&P 500 index could correct by up to 10% this quarter due to the impact of US tariff policies [3]

Economic Impact - The "money bag war" initiated by the Trump administration has severely impacted the U.S. economy, imposing tariffs of up to 60% on Chinese goods and 25% on European steel and aluminum, leading to soaring prices and an additional monthly expenditure of $200 for food for average families [3][6] - A report from the California government indicated that tariffs resulted in a loss of up to $170 billion for businesses in the state over a year [3] Social Unrest - The policies of the Trump administration have led to widespread public discontent, with the Social Security Administration's website crashing for two weeks, preventing many elderly individuals from receiving their pensions [8] - Protests have erupted across the country, including truck drivers blocking highways due to financial losses from tariffs and elderly individuals gathering at Social Security offices to voice their grievances [8] Political Stalemate - The U.S. Congress has experienced paralysis, with 50 Democratic senators collectively taking a month-long recess to obstruct Trump's appointments, while the Republican party pushed through the appointment of Trump's ally, exacerbating political tensions [9] - Biden has publicly criticized Trump for undermining the Constitution and has highlighted the job losses resulting from Trump's Social Security policies [11] Federal Reserve Dynamics - Trump attempted to exert control over the Federal Reserve, pressuring it to lower interest rates, but faced opposition from seven board members during a rate meeting [6] - The resignation of a key board member, appointed by Biden, has allowed Trump to nominate a supporter of aggressive rate cuts, potentially leading to significant economic consequences, including a projected inflation rate increase to 5.2% [6]

Group 1 - Citi has adjusted its bearish forecast on gold, predicting that prices will rise to record highs in the short term due to deteriorating U.S. economic conditions and tariffs driving inflation [1] - Analysts, including Max Layton, forecast that gold prices will fluctuate between $3,300 and $3,600 per ounce over the next three months, influenced by higher-than-expected average U.S. import tariffs [1] - This new outlook contrasts sharply with Citi's June prediction, which anticipated gold prices would fall below $3,000 per ounce in the coming quarters [1] Group 2 - Despite a more optimistic outlook for gold prices, Citi analysts noted that their previous short-term price range of $3,150 to $3,500 per ounce performed well, as recent price consolidation confirmed this assessment [2] - The analysts maintain a cautious stance on gold prices for 2026, citing increased certainty regarding trade and potential stimulus measures from the "Great and Beautiful Act," which may signal an end to the pause in U.S. job growth [2]

Economic Outlook - The recent employment report indicates that the U.S. economy is heading towards a recession, with various economic indicators signaling a downturn [1] - Consumer spending is stagnating, construction and manufacturing sectors are contracting, and employment is expected to decline [1][2] - The Federal Reserve faces challenges in responding to rising inflation, which complicates potential interventions [1] Employment Data - Non-farm payrolls increased by only 73,000 last month, significantly below the expected 110,000, with previous months' data also revised downwards [2] - The average monthly job growth over the past three months is only 35,000, indicating a slowdown in employment growth [2] - Despite a stable unemployment rate around 4% to 4.2%, the labor force participation rate is declining due to reduced foreign-born labor [3] Labor Market Dynamics - The reduction in foreign-born labor by 1.2 million over the past six months is attributed to restrictive immigration policies, leading to a stagnation in labor supply [3] - There is a hiring freeze across the economy, particularly affecting new graduates, which suggests a significant drop in the "neutral job growth" needed to maintain stable unemployment [3] - Morgan Stanley economists have raised alarms about potential recession, noting that private sector job growth has averaged only 52,000 per month over the past three months [3][4] Economic Indicators - The second quarter GDP showed unexpected growth, but domestic final demand indicators suggest a slowdown [2] - Core inflation accelerated to 2.8%, exceeding the Federal Reserve's target of 2%, while consumer spending growth in June fell short of expectations [2] - The Atlanta Fed's GDP tracking model predicts a slowdown in economic growth from 3% in the second quarter to 2.1% in the third quarter [2]

Core Viewpoint - The U.S. non-farm payroll data for July showed only 73,000 jobs added, significantly below the expected 104,000, officially labeling the economy as "recession" [1] - The data for May and June was substantially revised down, raising suspicions about previous data embellishment [1] Group 1 - July non-farm payrolls were 73,000, falling short of the 104,000 forecast [1] - The downward revision of May and June data has led to skepticism regarding the accuracy of prior employment reports [1]

Market Overview - International gold prices saw a significant increase on August 1, closing at $3,348.53 per ounce after reaching a high of $3,355.09 [1] Economic Data - The U.S. unemployment rate for July was reported at 4.2%, matching market expectations, while the previous month's rate was 4.1% [2] - The seasonally adjusted non-farm payrolls for July added 73,000 jobs, falling short of the expected 110,000, with prior months' figures revised down significantly from 147,000 to 14,000 [2] - Average hourly wages increased by 3.9% year-over-year, surpassing the expected 3.8%, and month-over-month wages rose by 0.3%, aligning with expectations [2] Economic Outlook - Moody's chief economist Mark Zandi warned that the U.S. economy is on the brink of recession, citing stagnation in consumer spending and contraction in construction and manufacturing sectors [4] - The low unemployment rate is attributed to stagnant labor growth and a decrease in immigrant labor, leading to a decline in labor force participation [4] - The current job market is experiencing a freeze in hiring and a reduction in average working hours, indicating increasing employment pressures [4] Federal Reserve Insights - Stephen Miran from the White House suggested the need for a "new perspective" on economic statistics, following President Trump's claims of manipulated employment data [5] - Federal Reserve officials, including Williams, noted that the labor market remains robust despite the disappointing non-farm payroll data, with a cautious stance on potential interest rate cuts [6][7] - The probability of the Fed maintaining interest rates in September is at 10.9%, while the likelihood of a 25 basis point cut is at 89.1% [8] Gold Market Dynamics - The largest gold ETF, SPDR Gold Trust, reported a decrease in holdings by 1.43 tons, bringing the total to 953.08 tons [7] - Gold prices reacted positively to the weak employment data, with a notable rise following the release of the non-farm payroll report [11]

Core Insights - Morgan Stanley reports a significant downward revision of 258,000 jobs, the largest since 1979, which is 4-5 times the normal adjustment range [1][2][5] - The analysis indicates that current employment data holds more predictive power regarding economic trends than historical revisions, maintaining the expectation of no interest rate cuts until 2025 [1][9] Employment Data Revision - The July employment report revealed unexpected large downward revisions for the previous two months: June's non-farm employment was revised from 147,000 to only 14,000, a reduction of 133,000; May's data was adjusted from 144,000 to 19,000, a drop of 125,000, totaling a net revision of 258,000 [2][3] - Historically, from March 1979 to July 2025, the average net revision has been an upward adjustment of 1,200 jobs, making this downward revision the largest in 46 years when excluding the impact of the COVID-19 pandemic [3] Statistical Analysis - The average absolute value of historical revisions is 56,000 jobs, with a standard deviation of 61,000; thus, the 258,000 job revision is statistically significant and considered an outlier [5] - Using a Probit regression model, Morgan Stanley found that while the large downward revision correlates with an increased recession probability, the effect is limited, raising the likelihood of recession by only 9 percentage points [9] Current Employment Signals - The July report showed an addition of 73,000 jobs, which is deemed more critical than the previous downward revisions; the current employment data is viewed as a stronger indicator of economic health [9] - Other indicators from the July report, such as moderate wage growth, slight increases in hours worked, and low unemployment rates, suggest that these current signals are more relevant than the historical downward adjustments [9] - Despite acknowledging that the downward revisions indicate a faster-than-expected slowdown in labor demand, Morgan Stanley maintains its forecast of no interest rate cuts through 2025, suggesting that recession risks remain elevated but not at a level that would alter the overall economic outlook [9]