US Q3 GDP tracking 2.8% after July durable goods orders

Durable goods orders rose 2.0% m/m in July, well above our (-0.6%) and consensus expectations (-0.4%) for a modest decline. Part of this strength was due to a smaller-than-expected decline in aircraft orders after the surge in June, as well as a shorter-than-usual seasonal auto retooling shutdown that boosted output of motor vehicles and parts in July.

 Nondefense aircraft orders fell just 6.0% m/m (previous: 69.7%) while motor vehicle and parts orders grew 4.0% m/m (previous: 0.9%). This gain in motor vehicles and parts contributed nearly half (0.8pp) of the total growth in durable goods orders. Outside of these two idiosyncratic factors, however, core orders were notably stronger than expected and several categories saw upward revisions to prior months' data.

 Durable goods orders ex transportation rose 0.6% m/m (previous: 1.0%) and core capital goods orders grew 2.2% m/m (previous: 1.4%) in July. Machinery, computers and electronics and other transportation goods all reported solid demand on the month. The orders side of the July report came in stronger-than-expected as well, though less so than orders. Core capital goods shipments rose 0.6% m/m after an upwardly revised 0.9% m/m gain in June. Finally, manufacturers' inventories of durable goods were flat in July, and revised lower in June (0.4% m/m, initial: 0.6%).

"The revisions to June data for core capital goods shipments suggest a bit more equipment investment in Q2. This boost to Q2 GDP was offset by the downward revisions to manufacturers' inventories, however. On net, our Q2 GDP tracking estimate fell 0.1pp to 3.2% after rounding. Stronger-than-expected core shipments in July suggest more equipment investment in Q3, which modestly boosted our tracking estimate of Q3 GDP one-tenth to 2.8%", says Barclays.