US: BEA will revise down its Q2 GDP estimate to 1.1% - Nomura

Research Team at Nomura, suggests that the first estimate of US Q2 real GDP disappointed by growing at an annualized rate of only 1.2% q-o-q.

Key Quotes

“The major source of drag on growth in Q2 came from inventory investment, which lowered growth by 1.2pp. The details also showed broad weakness in business fixed investment, as business spending on nonresidential structures and equipment declined. Moreover, residential investment declined for the first time since Q1 2014. On the upside, real personal spending bounced back strongly, growing at an annualized rate of 4.2% q-o-q following some slowdown in spending in Q1.

Incoming data since the first estimate have been, on balance, less favorable for growth. Construction spending on both nonresidential and residential structures came in below the BEA’s assumptions in the June report. Furthermore, trade data suggest more imports in Q2 than initially estimated. On the upside, inventory data for June was somewhat better than expected. Taking these factors into account, we think that the BEA will revise down its Q2 GDP estimate to 1.1% q-o-q from 1.2% q-o-q, previously.”