U.S. economy likely to have grown 2.5 pct sequentially in Q2, says Barclays

U.S. advanced Q2 GDP data is set to be released next week. According to a Barclays report, the BEA’s advance estimate of Q2 GDP would show the economy expanded 2.5 percent sequentially. The outlook of Barclays for a rebound in activity during the second quarter was softer than consensus forecasts because of the outlook for auto assemblies and sales, which are significant contributors to inventories and durables consumption, respectively.

The auto industry is in the midst of a transition away from high production at all costs to a better balance between the quantity and quality of sales. Thus, a rebound in auto sales in the second quarter is unlikely.

The incoming data on private consumption continues to be strong despite the subdued auto sales data. Private consumption is expected to grow 3 percent, stated Barclays. The activity is likely to be underpinned by modest growth in business fixed investment, with equipment, structures and intellectual property spending added about 0.4 percentage point to growth. Residential investment and net trade should be countering these categories. Residential investment is unlikely to have grown in the quarter.

“We expect no change in public consumption and investment. Altogether, final sales to domestic purchasers, which equals GDP less trade and inventories, should also rise 2.5 percent q/q saar”, added Barclays.