LIVE MARKETS-Thursday data downpour: GDP, jobless claims, durable goods, et al

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THURSDAY DATA DOWNPOUR: GDP, JOBLESS CLAIMS, DURABLE GOODS, ET AL

Investors were treated to a data deluge on Thursday, most of which surprised to the upside and dampened expectations that Powell & Co will cut its key policy rate more than another 25 basis points before year-end.

First, the U.S. economy expanded by 3.8% at a quarterly annualized rate in the April-to-June period, a more robust expansion than the previously-reported 3.3% growth, according to the Commerce Department's third and final take on second-quarter GDP USGDPF=ECI.

Delving deeper, imports (a GDP negative) plunged 29.3% as the Trump tariff policy took a bite, adding 5.0 percentage points to the headline, while private inventories fell back to earth after the first quarter's tariff-related front-loading, subtracting 3.4 ppts from the total.

Domestic sales increased by a robust 7.5%, up from the 6.8% growth in the Commerce Department's prior iteration.

Consumer spending, which accounts for about 70% of the U.S. economy, increased by 2.5%, much stronger than the prior 1.6% reading. Spending on services grew by 2.6%, sharply higher than the previously stated 1.2%. Outlays by American consumers contributed 1.7 ppts to the headline.

While the report "confirmed that the economy grew at a healthy clip, even as tariff uncertainty reached fever pitch during the quarter," Paul Stanley, chief investment officer at Granite Bay Wealth Management says "Thursday's GDP strength likely doesn't change the Federal Reserve's expected path of rate cuts."

Moving to the labor market, 218,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI last week, an unexpected 6% drop from the prior week and 17,000 fewer than analysts anticipated.

The underlying trend of initial jobless claims - as illustrated by the four-week moving average - is moving sideways with a slight downward bias.

Ongoing jobless claims USJOBN=ECI, reported on a one-week lag, were essentially unchanged at 1.926 million, or 9,000 shy of economist projections.

The report should allay some Fed fears regarding softness in the "employment" side of its dual mandate.

"The latest jobless claims data offer some assurance that labor market conditions are not deteriorating," says Nancy Vanden Houten, lead economist at Oxford Economics. "Claims data support our forecast for the Federal Reserve to remain hold at its October meeting and to delay the next rate cut until December."

New orders for long-lasting, U.S.-made goods USGDN=ECI jumped by 2.9% last month, defying the -0.5% drop Wall Street estimate, and marking a surprise rebound from July's 2.7% drop.

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

Drilling down into the Commerce Department's report - which covers everything from toaster ovens to attack drones - a 21.6% increase in commercial aircraft orders and a 50.1% jump in defense aircraft were largely responsible for the surge. Remove all transportation-related items, and new orders would have risen by a more subdued 0.4%. Excluding defense items, new orders increased 1.6%.

Core capital goods - which excludes aircraft and defense items and is considered a barometer of U.S. corporate capex plans - increased by 0.6%, representing a modest loss of momentum following the previous month's downwardly revised 0.8% gain, and landing well north of the expected 0.1% decline.

"Core orders have held up better than the depressed level of most survey indicators of capex intentions would have suggested recently," writes Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. "The slight improvement seen in recent months seems to reflect a partial easing of tariff-related uncertainty."

The sales of pre-owned U.S. homes USEHS=ECI edged down 0.2% in August to an even 4.0 million units at a seasonally adjusted annualized rate (SAAR), according to the National Association of Realtors (NAR).

That's a shallower dip than the 1.2% decrease predicted by economists.

"Home sales have been sluggish over the past few years due to elevated mortgage rates and limited inventory," writes Lawrence Yun, NAR's chief economist. "However, mortgage rates are declining and more inventory is coming to the market, which should boost sales in the coming months."

A 0.3% decline in single-family homes, which represent the lion's share of the total, was responsible for the overall loss. Condo/co-op sales were unchanged from July.

Inventories held steady. At August's sales pace, it would take 4.6 months to sell every home on the market, unchanged from July.

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

The gap between the value of goods imported to the United States and those exported abroad narrowed more than expected, contracting by 16.9% to $85.5 billion last month.

"The big picture is that the underlying goods trade deficit seems to have settled only a bit below its 2024 level, now that the big tariff stockpilling swings earlier this year have mostly worked their way through the numbers," writes Oliver Allen at Pantheon.

The value of goods stacked in the warehouses of U.S. wholesalers zigged when it was expected to zag, dropping 0.2% as opposed to the 0.2% rise economists predicted.

(Stephen Culp)

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