US durable goods: Picture for investment remains poor - ING

Rob Carnell, Chief International Economist at ING, says that today’s sharp decline in June US durable goods orders (-4.0%) contributes to picture a poor picture for business investment.

Key Quotes:

“The volatile durable goods orders data fell again in June by 4.0%MoM, following a 2.8% decline in May. This matters because goods orders are one of the ways we can track business investment over the quarter. With the quarter now complete, the picture for business investment in 2Q16, following 2 previous quarters of decline, remains poor.”

“We think this suggests a flat business investment figure in 2Q16 - or something close to flat - and this would be a slight improvement on 4Q15 and 1Q16. We had not expected much more than this, but nonetheless, our 2.8%QoQ forecast for 2Q16 GDP growth might now be a couple of tenths too high, assuming we have all our other subcomponents correct.”

“This would still leave 2Q16 GDP at about 2.5% - a marked improvement on 1.1% in 1Q16, and will help hawkish Fed members argue that the Fed should not hold its fire for too much longer before hiking rates again.”