World Economic Growth for Q2 downgraded

The economy got a downgrade for the second quarter but it was in line with expectations.  The Commerce Department’s second estimate for second quarter GDP growth was nudged down to a modest gain of 1.0 percent annualized, compared to the initial estimate of 1.3 percent and to first quarter growth of 0.4 percent.  Analysts had projected a revision to 1.1 percent annualized.

 The downward revision to GDP primarily reflected downward revisions to private inventory investment and to exports.  These were partly offset by upward revisions to nonresidential fixed investment and to personal consumption expenditures.Final sales of domestic product were revised to an annualized 1.2 percent from the initial estimate of 1.1 percent.  Final sales to domestic purchasers were revised up to 1.1 percent from the original estimate of 0.5 percent annualized.

 Economy-wide inflation was revised up marginally to 2.4 percent annualized, compared to the original estimate of 2.3 percent and the first quarter rise of 2.5 percent.  The consensus forecast was for 2.3 percent.While GDP growth was revised down, the more important measure of momentum—final sales—were revised up slightly but are still sluggish.

 Durables orders show surprising strength:

 The timing could not have been better with increased concern about the health of the manufacturing sector. A monthly surge in new orders for motor vehicles & parts, the best in eight years, headlined a strong durable goods report for July. New orders for durable goods surged 4.0 percent in the month with the motor vehicle component up 11.5 percent in what appears to be the hoped for snapback from an earlier shortage of Japanese parts. Aircraft orders, which nearly always show wide month-to-month swings, rose 43 percent and together with motor vehicles made for a 14.6 percent jump in the transportation category.

 Excluding transportation, new orders rose a solid 0.7 percent following 0.6 and 0.8 percent gains in the two prior months.

However, new orders for nondefense capital goods softened with a 1.5 percent dip in July, following gains of 0.6 percent and 1.9 percent in June and May, respectively.  Still, shipments of nondefense capital goods rose 0.2 percent in July, following a 1.9 percent boost in June and 1.7 percent jump in May.  July’s shipments are at a strong level, indicating a healthy gain in the third quarter for business equipment, exports or both.