US GDP growth at 2.6% with the consumer bouncing back - ING

"GDP growth was broadly in line with expectations, but the details of where the growth comes from offer some encouragement," argues James Knightley, Chief International Economist at ING.

Key quotes:

"US 2Q GDP growth has come in at 2.6% annualised versus 2.7% consensus while 1Q GDP growth was revised down to 1.2% from 1.4%. However, these are only fractional misses and the detail of the report is encouraging." 

"As expected there was a strong consumer spending story - consumption up 2.8% and 1Q revised up to 1.9%. Meanwhile non-residential fixed investment rose 5.2% so it is clear that households and businesses are still happy to spend. The main areas of weakness was residential investment (falling 6.8%) and government consumption growth remains soft, rising 0.7% after +0.5, +0.2 and -0.6% readings respectively for the previous three quarters. Another area of relative disappointment was the fact that inventories contributed nothing versus expectations of a rebound. However, this offers a potential pillar of support for 3Q growth."

"Overall, the headline growth rate is respectable rather than great, but to be fair the breakdown is a slightly better mix than hoped. However, given the Fed story is more about inflation right now this is unlikely to sway sentiment in any meaningful way. On that front we had a weak employment cost index figure of 0.5%QoQ for 2Q17 versus 0.8% in 1Q, which again highlights the lack of inflation pressures emanating from the jobs market. This will keep the market mind-set as doubting the Fed’s indicated path for interest rate hikes."