Durable goods orders disappointments broken down

Analysts at Nomura offered a breakdown of the US from overnight.

Key Quotes:

"Durable goods orders: Topline durable goods orders for May fell 1.1% m-o-m, below expectations (Nomura: -0.1%, Consensus: -0.6%), driven by a sharp 3.4% decline in transportation equipment orders. The prior month was revised down to a 0.9% decline from a 0.8% decline. Within transportation components, auto and parts orders increased 1.2% following a 0.5% increase in April, suggesting that autos production may not slow quickly amid flagging consumer vehicle sales. Civilian aircraft orders dropped 11.7%, exacerbating a decline in topline orders. Excluding volatile transportation components, durable goods orders were mixed, increasing only moderately by 0.1% (Nomura: -0.5%, Consensus: 0.4%), after a 0.5% decline in the previous month. Core capital goods shipments, a concurrent indicator of manufacturing activity and a component for GDP accounting, fell 0.2% after a modest increase of 0.1%. While month-to-month fluctuations can be somewhat volatile, recent weak readings in this measure increase the risk of seeing a less of a boost from business investment in Q2.

GDP tracking update:

The weaker-than-expected core shipments, a proxy of business equipment investment, led us to revise down our Q2 GDP tracking estimate by 0.1pp to 2.6% q-o-q saar from 2.7%. Among a number of different forecasters such as Atlanta Fed’s GDP Nowcast and Macroeconomic Advisers, equipment investment estimates for Q2 range from a 2.3% decline to a 2.1% increase. However, the range of these estimates is well-below the 7.1% increase in Q1, indicating some slowdown in equipment investment growth."

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