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Q2 GDP Preview

Ahead of today's key economic release, the US Q2 GDP number due at 8:30am ET, here is what some of the key players expect, via RanSquawk:

  • Sellside Consensus: 2.6%
  • Atlanta Fed: 2.8%
  • NY Fed: 2.0%
  • Goldman Sachs: 2.2%
  • JPM: 3.5%
  • Barclays: 2.7%
  • Citi 2.9%

A more detailed preview and market reaction courtesy of the analysts at FX Daily.

  • In the wake of the strong durable goods number yesterday, where the Jun rise of 6.5% was over double what the market was expecting, projections for today's Q2 GDP have been revised higher by some of the leading bank research teams.  Forecasts have bee raised by some 3-5 tenths of a % point based on the latest data read, which has been heavily bolstered by the size orders for the Boeing 737 jets previewed at the Paris air show.
  • The median consensus for today's number is around 2.4% rise, 1 percent higher than the final Q1 GDP print of 1.4% but it is worth taking into account the wide range of forecasts which stretch from 1.8% to (now) 3.5%, so there is still room for some sizeable deviation.  The core durable goods orders were not as stong for the Jun number, but were more than tempered by the upward revisions in May.
  • We also have to take note of the stronger earnings on balance, and these wil also feed into a healthy number, or at least further substantiate the consensus calls in the mid 2.0%'s.
  • The weaker USD may also have helped over these months.  Trade looks to have benefited, and this has been reflected in the narrowing of the deficit from $65.9B in May to just under $64B in Jun.  Q1 is also traditionally slow, with a pick up in Q2 a familair norm, so we factor this in also.
  • All points to further recovery in the USD, and a stronger than expected result should see the greenback reclaiming more ground, but we do not envisage a major rally, more so a continuation of the recovery from what are widely perceived to be oversold levels at the present time.

However, it's not just the GDP. As Citi adds, while most of the focus will of course be on Q2 GDP, keep one eye on the ECI figure (employment cost index). This is supposedly the Fed's preferred compensation measure, because it includes bonuses, benefits and controls for industry composition (unlike the AHE figures the market is often obsessed with). Today’s Q2 ECI reading is expected to come out at 0.6% QoQ, down from the 0.8% in Q1. If so, it could offset any hawkish bias from a stronger than expected GDP number.