US: Budget deficit narrower than expected at $42.9bn in July - Nomura

According to Treasury’s monthly budget statement, the US budget deficit in July was narrower than expected at $42.9bn, down from $112.8bn this time last year, notes the analysis team at Nomura.

Key Quotes

“The budget deficit on a fiscal-year-to-date basis now stands at $566bn, slightly wider than the $514bn from last year. On a y-o-y basis, receipts rose 10.5% while outlays fell 14.8%. Some of the narrowing of the deficit in July can be attributed to outlays that were shifted to June of this year due to a calendar quirk.”

“GDP tracking update: Yesterday’s data left our Q3 GDP tracking estimate unchanged at 2.5% q-o-q saar. The PPI data used to estimate deflators for residential improvement and brokers' commissions were stronger than expected, suggesting less residential investment of GDP. However, prices we use to deflate inventory investment came in a little weaker than expected, implying more real inventory investment. On net, the positive impact on inventory investment outweighs the negative impact on residential construction. But data from the monthly US Treasury budget statement indicate that defense spending was slightly weaker than expected, offsetting the net positive impact from the PPI data.”