Durable goods orders were up two percent in July on month-on-month (m-o-M) basis giving wider scope for the US gross domestic production (GDP) to reach over 2.8 percent in the third quarter this year as latest research reports forecast.
The automobile sector contributed to the most of the growth in orders for durable goods.
The growth in durable goods orders from Census Bureau leapfrogged all the forecasts made about economy performance. Econotimes forecasts growth of 0.6 percent and consensus expectations of 0.4 percent. Beating all these projects, durable goods orders rose two percent in July.
Barclays says that its forecast for Q2 GDP fell 0.1pp to 3.2 percent after the latest adjustments. "The better than projected core shipments in July indicate more funds inflow into equipment during the third quarter. This is boosting our tracking estimate of Q3 GDP towards 2.8 percent," says Barclays.
The main reason for this growth in orders for durable goods was smaller than expected drop in aircraft orders after the surge in June. Adding to this, shorter than usual seasonal auto retooling shutdown period has also boosted output in the automobile industry, which recorded modest growth in production of motor vehicles and spare parts in July.
Financial research firms differ on GDP growth forecasts. The latest data on durable goods led many financial firms to revise their projections on US GDP growth rate for the third quarter.
FXStreet on 26 August forecasts on 1.4 percent for the third quarter as it increased projection by only 0.01 percent from the earlier 1.3 percent forecast made on 18 August.
After the data report, the forecast for equipment spending for the third quarter rose from 7.7 percent to 8.9 percent. This is indicating marginal development in real inventory investment and its contribution to the GDP during the third quarter.
According to Census Bureau, the core capital goods orders rose from 1.4 percent to 2.2 percent. Machinery, computers, electronics and other transportation goods registered an encouraging growth during the month. The inventories of durable goods at Manufacturers remain unchanged in July.
Non-defense aircraft orders were dropped by six percent from 69.7 percent. The orders for motor vehicles and spare parts rose by four percent. The encouraging growth in the automobile sector accounted for about half of the total growth in the orders for durable goods. Several other categories also registered positive growth during the month, according to the data from Census Bureau.
Barclays is upbeat on potential growth in investments in equipment segment during the quarter. Its Q2 GDP growth forecast drops by 0.1pp to 3.2 percent and it made forecast of 2.8 percent for the Q3.
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