LIVE MARKETS-Thursday data roundup: GDP, jobless claims, pending home sales

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THURSDAY DATA ROUNDUP: GDP, JOBLESS CLAIMS, PENDING HOME SALES

Data released on Thursday appeared to punctuate Fed Chair Jerome Powell's remarks on Wednesday that the central bank is "in no hurry" to cut rates amid still-elevated inflation and solid consumer demand.

The U.S. economy grew at a 2.3% quarterly annualized rate in the closing months of 2024, a 0.8 percentage point deceleration from Q3 and weaker than the 2.6% consensus.

Delving deeper into the Commerce Department's first stab at fourth-quarter GDP USGDPA=ECI, a 2.2% decline in business investment, particularly a 7.8% plunge in the equipment segment, was largely responsible for the shortfall.

Business inventories, however, were the biggest drag, subtracting nearly one full percentage point from the headline.

Looking ahead, Oxford Economics (OE) expects 2025 GDP growth of 2.6%, "powered by consumer spending, upswing in business equipment spending, and steady government outlays," writes Bernard Yaros, lead U.S. economist at OE, who identifies tariffs as the biggest potential threat to GDP going forward, estimating that it could undercut 2025 by 1.2 pps.

Once again, the consumer, who shoulders the burden of about 70% of the U.S. economy, is the superhero in this picture.

Consumer spending surged 4.2%, a robust acceleration from 3.7% in Q3, with an eye-grabbing 12.1% increase in spending on durable goods providing a nice boost.

Consumer spending, in fact, contributed 2.8 pps to the upside.

The strength of the consumer was "backed by improving sentiment and generally solid household financial positions," says Jim Baird, CIO at Plante Moran Financial Advisors. "Solid wage growth, low unemployment, and the positive wealth effect of higher home prices and a strong stock market provided both the fuel and the mood to spend."

Pivoting to the labor market, 207,000 U.S. workers joined the queue at the unemployment office last week USJOB=ECI, 7.2% fewer than the prior week.

Analysts called for a subtler 1.3% decrease.

Calling the dip in weekly claims a glitch related to a bounce-back in the wake of the California wildfires, Samuel Tombs at Pantheon Macroeconomics sees turbulence ahead.

"Appetite for hiring in the private sector remains depressed, due to still-high borrowing costs and elevated uncertainty about federal policies," he says. "Accordingly, we continue to expect initial claims to rise to about 250K by the end of Q1."

Ongoing claims USJOBN=ECI, reported on a one-week lag, dropped 2.2% to 1.858 million, suggesting either an uptick in hiring or benefits expiry, or a combination of the two.

And now, to the housing market.

Signed contracts for the pending sales of pre-owned homes USNAR=ECI unexpectedly decreased by 5.5% in December, according to the National Association of Realtors (NAR).

As signed contracts tend to turn into actual sales a month or two down the road, the drop is disappointing - particularly in the wake of upbeat existing and new home sales data of late.

But NAR seems to blame the dip on the natural ebb and flow of the market.

"After four straight months of gains in contract signings, one step back is not welcome news, but it is not entirely surprising," NAR's Chief Economist Lawrence Yun writes.

But Carl Weinberg, chief economist at High Frequency Economics isn't convinced.

"We’ll agree with NAR economists that this might be a one-off blooper," Weinberg says, adding that the index remains "well below pre-pandemic levels that were well over 100,000. The housing sector is weak."

(Stephen Culp)

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