The small U.S. Q2 GDP growth trimming to 2.0%
The small U.S. Q2 GDP growth trimming to 2.0% from 2.1% beat estimates thanks to a big service consumption boost that left a robust 4.7% (was 4.3%) headline consumption rise, alongside a smaller than expected -$2.7 B inventory trimming. Analysts also saw a big downward intellectual property revision, and a bigger than expected downward net export bump of -$3.8 B. Analysts saw the expected downward growth revisions for government spending and residential investment, and small boost for nonresidential investment. The mix left final sales growth at 3.0%. Analysts lifted our Q3 GDP estimate to 2.5% from 2.1%, due both to firm service consumption and better than expected advance indicator figures. The Q2 GDP data still show an acceleration in government purchases, with lagged spending in response to last year's budget agreement that will likely support growth in Q3 as well. Business fixed investment slowed sharply in Q2 alongside a big gain in consumption, with business investment facing headwinds from trade uncertainty and delayed Boeing deliveries. Residential investment posted its sixth consecutive quarterly drop, while net exports were hit by a drop in exports after front-running boosts in Q4 and Q1. The elevated Q2 inventory accumulation rate should extend into Q3 with renewed import front-running. Analysts should see a big Q4 inventory hit, however, with the expected end to the 737 MAX grounding.