LIVE MARKETS-Data soup: GDP, durable goods, jobless claims, pending home sales, et al

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DATA SOUP: GDP, DURABLE GOODS, JOBLESS CLAIMS, PENDING HOME SALES, ET AL

A torrent of data on Thursday offered market participants (not to mention the Fed) plenty to choose from, running both hot and cold with upside and downside surprises.

First, the U.S. economy shrank by 0.5% at a quarterly annualized rate in the first three months of 2025, a deeper contraction than the previously-reported 0.2% dip, according to the Commerce Department's third and final take on first-quarter GDP USGDPF=ECI.

Delving deeper, imports (a GDP negative) jumped by 37.9%, detracting 4.7 percentage points from the headline, while private inventories and fixed investment - in particular a 23.7% jump in equipment - contributed a combined 3.9 ppts to the upside, as U.S. businesses pushed major purchases forward to beat the tariffs.

Domestic sales contracted by 3.1%, down from the 2.9% drop in the Commerce Department's prior iteration.

"The decline in Q1 GDP was a touch more than previously thought," writes Ryan Sweet, Chief U.S. economist at Oxford Economics (OE). "But the details are more troubling because of the downward revision to real final sales to domestic purchasers, the engine of the economy."

Consumer spending, which accounts for about 70% of the U.S. economy, increased by 0.5%, much weaker than the advance reading's 1.2% print. Breaking it down, Americans deferred purchases of durable goods amid elevated interest rates and policy uncertainty. Durable goods spending contracted by 3.7% while non-durables rose 2.1% and spending on services rose 0.6%, much weaker than the 1.7% previously reported.

"The revision to consumer spending was noticeable and led by recreation services and transportation services," Sweet adds. "Recreational services and travel are among the components of spending that we flagged as being sensitive to shocks in consumer sentiment, something that occurred in Q1 because of tariff-related declines in the stock market."

Last week, 236,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI, 10,000 fewer than the prior week, landing 3.7% below consensus.

Despite the dip, initial jobless claims continue to hover near the upper end of the 200,000 to 250,000 range in which the metric's been trapped for about two years.

This is supported by the underlying trend; the four-week moving average of initial claims is essentially moving sideways.

Noting that weekly claims are volatile, Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics says "The jump in WARN layoff filings in May and the recent further weakening of measures of job postings and hiring intentions suggest that the upward trend in initial claims will persist over the next couple months."

WARN filings (Worker Adjustment and Retraining Notification) are advance notifications of plant closings or mass layoffs.

Ongoing jobless claims USJOBN=ECI, reported on a one-week lag, increased by 1.9% to 1.974 million, or 24,000 more than analysts expected.

That's the highest reading since November 2021 and supports recent consumer survey data suggesting laid off workers are finding it increasingly difficult to find a replacement gig.

"With no reason to expect corporate hiring plans to suddenly improve, we retain our forecast that the unemployment rate will rise to 4.8% by the end of this year," Tombs adds.

New orders for long-lasting, U.S.-made goods USGDN=ECI jumped by 16.4% last month, blasting past the 8.5% predicted by economists, marking a robust bounce-back from April's 6.6% drop.

As is often the case, it was all about airplanes.

Drilling down into the Commerce Department's report - which covers everything from toaster ovens to attack drones - a 230.8% increase in commercial aircraft orders was largely responsible for the surge. Remove all transportation-related items, and new orders would have risen by a mere 0.5%. A 38.7% increase in defense-related capital goods also gave a boost to the headline.

Core capital goods - which excludes aircraft and defense items and is considered a barometer of U.S. corporate capex plans - increased by 1.7%, handily rebounding from April's 1.4% drop and breezing past the meager 0.1% estimate.

Even so, "because of falling capital-goods imports, stronger inflation tied to capital equipment, and a decline in nondefense aircraft shipments, we look for business equipment investment to dip by nearly 1% annualized in Q2, a marked slowdown from the prior quarter," says Bernard Yaros, lead U.S. economist at OE.

Meanwhile, signed contracts for the pending sales of pre-owned U.S. homes USNAR=ECI increased by 1.8% in May, according to the National Association of Realtors (NAR).

It was much more robust than the 0.1% blip higher economists anticipated, and marks a partial bounce-back from April's 6.3% plunge.

"Consistent job gains and rising wages are modestly helping the housing market," writes NAR chief economist Lawrence Yun. "Hourly wages are increasing faster than home prices. However, mortgage rate fluctuations are the primary driver of homebuying decisions and impact housing affordability more than wage gains."

The pending home sales index continues to wallow near the depths of the April 2020 pandemic shutdown nadir.

And finally, the Commerce Department released its advance take on goods trade balance USGBAL=ECI and wholesale inventories USAWIN=ECI for April.

The gap between the value of goods imported to the United States and those exported abroad widened by 11.1% to $95.59 billion last month.

"Although imports showed a modest recovery following May’s contraction," says Ryan Weldon, portfolio manager at IFM Investors. "The market remains cautious as the end of the 90-day tariff reprieve nears, with few substantial trade agreements in place."

Net trade was the biggest drag on first-quarter GDP, as companies rushed to make purchases ahead of Trump's expected tariff hikes.

The value of goods stacked in the warehouses of U.S. wholesalers dropped by 0.3%, erasing April's paltry 0.1% increase.

(Stephen Culp)

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