Durable Goods Gives Last Minute Preview For Q3 GDP

Talking Points:

- Durable Goods Orders fell in September, despite upward revisions to the previous reading.

- Gross Domestic Product (GDP) for Q3 is expected to be released tomorrow.

-The USD rose slightly on an overall limited market reaction.

Durable Good Orders fell in September by -0.1%, below expectations of 0.1%, and well below the upward revision on last month’s reading of 0.3%. Orders excluding Transportation met expectations of 0.2% growth, and the previous reading was revised up to 0.1%. This relatively weak consumption report comes on the heels of two weak consumer confidence reports in recent weeks, in both the University of Michigan survey and the Consumer Confidence Index. A strong consumer is vital to a strong US economy. Consumption is approximately 70% of US Gross Domestic Product and has been the primary driver of US GDP this year. While the headline GDP reading for Q2 was only 1.4%, Personal Consumption Expenditures grew 4.3%. Consumption kept GDP above water, which was being dragged down by negative growth in government spending and private investment.

GDP for Q3 is expected to be released tomorrow, with market expectations looking for 2.5% growth, versus 1.4% in Q2, and 2.6% growth in Personal Consumption, versus 4.3% in Q2. Before today’s Durable Goods report, the Atlanta Fed’s GDPNow was more pessimistic, forecasting only 2% growth for Q3 GDP. The New York Fed was only slightly more optimistic, with expectations of growth of 2.2%.

See the DailyFX economic calendar for Thursday, October 27, 2016

Chart 1: USD/JPY 1-minute Chart: October 27, 2016 Intraday

On a fairly limited market reaction, the dollar initially dipped. It then rose from a low of 104.64 to 108.82. At the time of writing, it was trending near those session highs.

--- Written by Omar Habib

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