US Q3 GDP tracking 1.2% after August factory orders

Factory orders declined 1.7% m/m in August, one-tenth below forecast (-1.6%) and further below consensus expectations (-1.2%). Orders for durable goods, first estimated at -2.0% m/m for August in the advance report last week, were revised down to -2.3% m/m in this morning's report. This fall accounted for 1.2pp of the decline in total factory orders. The remaining 0.5pp came from orders for nondurable goods, which fell 1.1% m/m in line with expectations. Core capital goods orders and shipments were revised lower for the past two months.

Core capital goods orders are now estimated to have risen 1.9% m/m in July (initial: 2.1%) and fallen 0.8% m/m in August (initial: -0.2%); shipments are now estimated to have risen 0.4% m/m in July (initial: 0.5%) and fallen 0.4% m/m in August (initial: -0.2%). The softer shipments data indicate more modest growth in equipment investment in Q3, while softness in orders suggests further weakness lies ahead. Elsewhere, manufacturers' inventories of nondurable goods fell 0.6% m/m in August and were revised lower to -0.4% m/m in July (initial: -0.1%).

"The downward revisions to core capital goods shipments for July and August trimmed our estimate of equipment investment in Q3. The data on manufacturers' inventories were below our expectations for August. This, along with a downward revision to July inventories data, suggests that private inventory investment is likely to cut sharply into Q3 real GDP growth. As a result, our Q3 GDP tracking estimate fell three-tenths to 1.2%",says Barclays.