The UK is typically the first G7 country to report its official estimate of quarterly GDP figures. Today was the day. Growth in Q2 was spot on expectations, matching the 0.8% pace seen in Q1. The US will issue its first estimate next week.
Today's US June durable goods order report was somewhat disappointing. This stems from the weakness in non-defense shipments excluding aircraft (-1.0% after May's series was revised to -0.1% from +0.4%), which is used for GDP calculations. It was sufficient to push the US 10-year bond yield back below 2.5.0% and cap the apparently rate-sensitive dollar-yen rate just below JPY102.
The 1.4% rise in orders of the same (non-defense, excluding aircraft) was better than expected, but the May series was revised dramatically lower (to -1.2% from +0.7%). Nevertheless, durable goods shipments rose at a 4.1% annualized rate in Q2 after rising 2.2% in Q1, indicating they will likely add to GDP, even if not by as much as it had appeared. In addition, inventories or durable goods also rose to $26.7 bln in Q2 from $19.1 lbn in Q1. This is also a net positive for US Q2 GDP. So while US GDP estimates may be shaved, it is still likely to come in at 3% or just above.
