Analysts at Nomura offered a review of the US key data from overnight while updating the GDP tracker.
New orders at factories fell 0.8% m-o-m in April, driven by sharp declines in orders for transportation equipment. Ex-transportation durable goods orders were up 0.9% m-o-m (unrevised from a preliminary estimate), highlighting continued momentum in the industrial sector, consistent with the advanced report Shipments of “core” capital goods (non-defense excluding aircraft) rose 1.0% m-o-m in April, reflecting 0.1pp upward revision from the advance estimate. The new orders of these goods came in at a 1.0% m-o-m increase. Shipments of nondurable goods increased 0.1% m-o-m, held down partly by a sharp drop in shipments of tobacco products (-11.7% m-o-m). April’s report on factory activity overall appears consistent with firming Q2 momentum. However, there is some risk that businesses will respond negatively to a material escalation in trade tensions.
GDP tracking update:
The final estimates of shipments and new orders of core capital goods for April were broadly in line with our expectations and revisions to prior months were minor. The growth in manufacturers’ inventories was stronger than we expected in April, implying stronger investment in inventories in Q2. March inventories were revised down. The revised estimate suggests weaker inventory accumulation in Q1 than the BEA’s assumption but a stronger increase in Q2. Thus, our Q1 real GDP tracking estimate is at 2.1% q-o-q saar, 0.1pp lower than the BEA’s second estimate. We raised our Q2 real GDP tracking estimate by 0.1pp to 4.1% q-o-q saar.“