Analysts at Nomura offered their US Q2 GDP tracking update after recent US data beats.
Key Quotes:
“Durable goods orders: May durable goods orders fell 0.6% m-o-m, below our expectation but above market consensus (Nomura: -0.5%, Consensus: -1.0%), driven by sharp declines in orders for motor vehicles and parts as well as civilian aircraft. Orders excluding transportation equipment fell 0.3% m-o-m, in line with our forecast but below market expectations (Nomura: -0.3%, Consensus: +0.5%). In addition, shipments of core capital goods (excluding defense products and civilian aircraft) fell 0.1% m-o-m and orders of those goods dropped 0.2%. The declines point to a possible slowdown in equipment investment growth after strong gains in previous months. While we expect the slowdown to be transitory, escalation in trade tension poses material risk to our equipment investment outlook in the near term.”
“Advance goods trade balance: The advance US goods trade balance came in stronger than expectations, registering a deficit of $64.8bn (Nomura and Consensus: $69.0bn). The data imply notably higher net exports in Q2 than we expected. The upside surprise was driven by strength in goods exports, which increased 2.1% m-o-m, while goods imports were up only 0.2%. Strong growth in goods exports will likely wane in coming months, given that the increase in exports was concentrated in exports of foods, feeds and beverages (+12.8% m-o-m). This increase was likely due to firms expediting agricultural exports in the face of upcoming retaliatory tariffs from US trading partners as well as issues with seasonal adjustment.”
“Given the stronger-than-expected net exports in May, we revised up our Q2 GDP tracking estimate by 0.7pp to 4.9% from 4.2%.”
“Incoming information points to an acceleration in growth in Q2.”
“While some of the positive contribution from goods exports could wane in coming quarters as trade disputes intensify and foreign growth slows, domestic demand boosted by expansionary fiscal policy should support economic activity.”
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