US Q2 GDP tracking 3.4% after June durable goods orders

Durable goods orders rose 3.4% m/m in June (previous: -2.1%), above our (2.0%) and consensus (3.4%) expectations, as a 66.1% m/m surge in nondefense aircraft orders boosted the headline series. This surge in aircraft orders reverses the prior month's 31.6% slump and added 3.0pp to the reading for total orders. Excluding transportation, orders rose 0.8% m/m (previous: -0.1%), in line with the forecast (0.8%) and above consensus expectations (0.5%). Core capital goods orders registered the fastest pace of growth since March, rising a solid 0.9% m/m in June (previous: -0.4%). Looking through the volatile aircraft reading that tends to distort total durable goods orders, this morning's report shows positive order trends for a number of core categories.

"Fabricated metal products (2.0% m/m, previous: 0.5%), machinery (1.4% m/m, previous: 0.5%), and electrical equipment (2.8% m/m, previous: -3.7%) all reported better demand at quarter-end. This strength did not show through to the shipments side of the report, though, where total durable shipments rose just 0.1% m/m (previous: -0.3%). Core capital goods shipments fell 0.1% m/m in June and were revised lower in May (-0.3% m/m, initial: -0.1%). Elsewhere, manufacturers' inventories of durable goods rose a stronger-than-expected 0.4% m/m (previous: -0.2%)", notes Barclays.

The downward revision to core shipments and weak reading for June imply tepid growth in real core equipment investment in Q2. This was offset partially by an upward revision to shipments data for aircraft. Together, Q2 equipment investment fell modestly. The growth in manufacturers' inventories of durable goods was notably stronger than expected in June and represents the fastest pace of inventory stocking for the sector since December of last year. This boosted private inventory investment in Q2, more than offsetting the decline in estimate equipment investment. On net, Q2 GDP tracking estimate rose two-tenths, to 3.4%.