EB SECURITIES: In the second quarter, the "import grabbing" effect weakened, and the weakness in U.S. consumption and investment is hard to conceal. Rate cuts may resume in the second half of the year

According to the Zhitong Finance APP, Everbright Securities published a research report stating that the "import rush" effect weakened in the second quarter, with the annualized month-on-month rate of U.S. imports dropping to -30.3%, leading to a significant contraction in the net export drag on GDP, which is an important reason for the positive economic growth in the second quarter. However, on the other hand, consumption and investment remain weak, with the U.S. consumer confidence index being low in the second quarter, resulting in weak personal consumption performance, with a month-on-month growth rate of 1.4%, the second lowest since 2024. Private investment's annualized month-on-month rate also dropped to -15.6%, so the resilience of this economic data should not be overestimated. Everbright Securities believes that the probability of the Federal Reserve restarting interest rate cuts in the second half of the year is relatively high. Everbright Securities' specific views are as follows: On July 30, 2025, the U.S. Bureau of Economic Analysis released the preliminary GDP data for the second quarter of 2025: (1) Preliminary annualized quarter-on-quarter real GDP growth rate for the second quarter +3.0%, expected +2.4%, previous value -0.5%; (2) Preliminary quarter-on-quarter real personal consumption expenditure growth rate for the second quarter +1.4%, expected +1.5%, previous value +0.5%; (3) Preliminary annualized quarter-on-quarter core PCE price index growth rate for the second quarter +2.5%, expected +2.3%, previous value +3.5%. The rebound in the quarter-on-quarter consumption growth rate in the U.S. for the second quarter of 2025 mainly comes from the contribution of net exports under the weakened "import rush" effect, while consumption and investment remain weak. On one hand, the "import rush" effect weakened in the second quarter, with the annualized month-on-month rate of U.S. imports dropping to -30.3%, leading to a significant contraction in the net export drag on GDP, which is an important reason for the positive economic growth in the second quarter. On the other hand, consumption and investment remain weak, with the U.S. consumer confidence index being low in the second quarter, resulting in weak personal consumption performance, with a month-on-month growth rate of 1.4%, the second lowest since 2024. Private investment's annualized month-on-month rate also dropped to -15.6%, so the resilience of this economic data should not be overestimated. From the perspective of interest rate cuts, while the U.S. economic growth has turned positive, the weak performance of consumption and investment indicates that the U.S. economy is still in a downward channel, and the probability of the Federal Reserve restarting interest rate cuts in the second half of the year still exists. In terms of the economic data itself, objectively speaking, the economic data for the second quarter exceeded expectations, alleviating concerns about an economic recession, and correspondingly, the Federal Reserve chose to pause interest rate cuts in July and continue to maintain a wait-and-see approach. However, considering that the rebound in economic quarter-on-quarter growth mainly comes from the contribution of net exports under the weakened "import rush" effect, while consumption and investment remain weak, we believe that the probability of the Federal Reserve restarting interest rate cuts in the second half of the year is relatively high. Market reaction: On July 30, 2025, U.S. stock indices showed mixed performance, with the Dow Jones and S&P 500 down 0.4% and 0.1% respectively, while the Nasdaq index rose 0.1%. The yield on the 10-year Treasury bond rose by 4 basis points to 4.38%, and the yield on the 2-year Treasury bond rose by 8 basis points to 3.94%. Risk warning: U.S. economy falls short of expectations; geopolitical situation evolves beyond expectations; international trade frictions intensify