LIVE MARKETS-Choose your poison: GDP, jobless claims, durable goods, pending home sales

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CHOOSE YOUR POISON: GDP, JOBLESS CLAIMS, DURABLE GOODS, PENDING HOME SALES

Investors on Thursday were treated to a mixed buffet of economic dishes served both hot and cold.

The Commerce Department's second stab at fourth-quarter GDP USGDPP=ECI reiterated that the economy grew at a 2.3% quarterly annualized rate in the last three months of 2024.

The number marks a slowdown from the third quarter's 3.1% growth.

On the surface there were few surprises. Consumer spending, which accounts for about 70% of GDP, grew at 4.2% as previously stated.

But below that surface, there was some churn.

Most worryingly, business investment was revised down, falling 3.2% instead of the shallower 2.2% drop shown in last month's advance take.

As illustrated by the graphic below, consumers contributed 2.8 percentage points to the upside, while private inventories and fixed investment were the biggest detractors, together subtracting 1.1 pps from the headline.

"The revisions to GDP were too trivial across the board to cause any ripples in the markets," says Carl Weinberg, chief economist at High Frequency Economics. "However, the Fed will also be looking at the jump in initial jobless claims also reported this morning."

"They will be wary of that number, we suspect."

Last week, 242,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI, the most since mid-December, according to the Labor Department.

It marked a 10% weekly spike and landed 21,000 north of consensus.

This figure does not include the thousands of federal government employees who have been fired as part of billionaire Elon Musk's Department of Government Efficiency's (DOGE) mass layoffs.

"We don't think (the report) signals significant labor market deterioration," says Oren Klachkin, economist at Nationwide. "That said, direct and indirect job cuts stemming from DOGE orders may show up more visibly over the coming weeks."

Federal workers utilize a separate program called UCFE (unemployment compensation for federal employees), which is reported with a one-week lag. That data has yet to reflect the firings most occurred around Valentine's Day.

Ongoing claims USJOBN=ECI, reported on a one-week delay, inched down 0.3% to 1.862 million.

Switching to the industrial sector, new orders for long-lasting, U.S.-made merchandise USGDN=ECI rebounded in January, rising 3.1% and blasting past the 2.0% gain analysts expected.

The gain handily wiped out December's upwardly revised 1.8% decrease.

Delving into the Commerce Department's report, which covers everything from cappuccino makers to attack drones, a 93.9% increase in commercial aircraft orders is the eye-popper. A 7.1% increase in computer equipment and a 9.8% surge in transportation-related goods made up for a 2.5% drop in motor vehicle sales.

Excluding transportation items, durable goods orders were unchanged from December.

New orders for core capital goods, which excludes aircraft and defense items, and is viewed as a barometer for U.S. capex plans, grew by 0.8%. That's much more robust than the 0.3% estimate, and makes up for the prior month's downwardly revised 0.2% gain.

"At least some of the recent improvement in core orders likely reflects businesses attempting to get ahead of the new tariffs threatened by the President," says Oliver Allen, chief economist at Pantheon Macroeconomics.

Bringing it home, signed contracts for the pending sales of pre-owned U.S. homes USNAR=ECI slid by 4.6% in January, according to the National Association of Realtors(NAR).

It was a much steeper drop than the 1.3% dip economists anticipated, and can be tossed atop the heap of recent housing indicators (new/existing home sales, housing starts, mortgage demand, homebuilder sentiment) showing weakness in the sector as borrowing costs remain elevated and political/economic uncertainties keep would-be homebuyers on the sidelines.

Is it possible that the freak cold snap which plunged much of the U.S. into the deep freeze had anything to do with it?

"It is unclear if the coldest January in 25 years contributed to fewer buyers in the market, and if so, expect greater sales activity in upcoming months," writes Lawrence Yun, NAR's chief economist. "However, it's evident that elevated home prices and higher mortgage rates strained affordability."

It was a lower pending home sales index reading than the April 2020 pandemic shutdown nadir.

(Stephen Culp)

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