The U.S. Q2 GDP growth boost to 4.2%
The U.S. Q2 GDP growth boost to 4.2% from 4.1% beat estimates thanks to a larger than expected $6.2 B net export hike, alongside small unexpected boosts in public construction and equipment spending, while inventories were lifted $1.0 B rather than trimmed. Analysts also saw an expected big boost for intellectual property investment, and expected small downward bumps for consumption and residential construction. Final sales growth was raised to a robust 5.3% from 5.1%. Analysts left our Q3 GDP growth estimate at 3.5%. The Q2 data show a hefty $57.3 (was $58.3) B inventory subtraction, leaving a big $26.9 (was $27.9) B liquidation rate that marks the largest pull-back since the last recession. Beyond inventories, Q2 GDP revealed solid growth in consumption after a weak Q1, and a robust path for business fixed investment. Government purchases rose in Q2 with help from the budget deal, and residential construction gave back some of its big Q4-Q1 post-hurricane gain. Analysts saw robust Q2 export growth that reflects both faster global GDP growth and a front-running by exporters ahead of Q3 tariffs, with a surge in soy bean exports and a drop in soy bean inventories, leaving Q2 trade and inventory gyrations that were largely offsetting for GDP, and that will presumably be reversed in Q3.