{"id":193283,"date":"2024-04-25T11:15:00","date_gmt":"2024-04-25T15:15:00","guid":{"rendered":"https:\/\/ibkrcampus.eu\/uncategorized\/gdp-downside-miss-meets-upward-beat-apr-25-2024\/"},"modified":"2024-04-26T09:39:44","modified_gmt":"2024-04-26T09:39:44","slug":"gdp-downside-miss-meets-upward-beat-apr-25-2024","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.eu\/campus\/traders-insight\/securities\/macro\/gdp-downside-miss-meets-upward-beat-apr-25-2024\/","title":{"rendered":"GDP: Downside Miss Meets Upward Beat: Apr. 25, 2024"},"content":{"rendered":"\n

Treasury yields are soaring to their loftiest levels of the year on the back of this morning\u2019s GDP report which depicted slowing economic growth amidst accelerating price pressures. The stagflationary combination, is particularly troublesome for stocks, whose fundamental prospects are generally driven by a robust economy while their relative valuations are tied to rates. Also pushing up the cost of capital were today\u2019s reports on unemployment claims and pending home sales, with both beating on the hotter side. Investors are currently digesting corporate earnings while they accept the probable reality of rate cuts later rather than sooner.<\/p>\n\n\n\n

Economic Growth Cools Off<\/strong><\/h2>\n\n\n\n

Economic growth moderated in the first quarter as consumers curbed spending. This morning\u2019s Gross Domestic Product (GDP) print from the Bureau of Economic Analysis reflected quarterly growth of 1.6%, slowing to almost half of the previous quarter\u2019s 3.4% clip while missing the median projection of 2.5%. Driving the deceleration were a decline in goods outlays and a significant drag on net exports, which were partially offset by an acceleration in services consumption. Private investment also picked up some of the slack, as homebuilders rushed to add supply in the beginning of the year due to the prospect of lighter rates. The residential segment led investment gains amidst a modest slowdown in capital expenditures on the corporate side. Government spending also increased.<\/p>\n\n\n\n

\"Economic<\/figure>\n\n\n\n

Past performance is not indicative of future results<\/p>\n\n\n\n

Price Pressures Build<\/strong><\/h2>\n\n\n\n

Unfortunately, however, lighter growth didn\u2019t translate to reduced price pressures, with the quarterly, annualized reads on the headline and core versions of the Personal Consumption Expenditures Price Index rising to 3.1% and 3.7% from 1.7% and 2% in the fourth quarter. Wall Street expected numbers closer to 3% and 3.4%. The services sectors, which haven\u2019t cooperated on the inflationary front this cycle, continue to be pressured by elevated labor intensity, which is contributing to firms passing on higher costs to consumers. Goods and commodities, similar to last year, meanwhile, may begin to provide disinflationary pressures in future months if geopolitical concerns are kept at bay.<\/p>\n\n\n\n

Labor Tightness Lingers<\/strong><\/h2>\n\n\n\n

We received further confirmation today that labor conditions remain tight, with both initial and continuing unemployment claims declining on a week over week basis and coming in beneath estimates. Initial claims dropped to 207,000 during the week ended April 20 versus the projected 214,000 and the previous period\u2019s 212,000. Continuing claims for the week ended April 13 fell to 1.781 million from 1.796 million the week before while economists were expecting a number closer to 1.814 million. Both figures are indeed trending lower, with the four-week moving averages moving down to 213,250 and 1.794 million from 214,500 and 1.801 million during the prior weeks.<\/p>\n\n\n\n

\"Unemployment<\/figure>\n\n\n\n

Past performance is not indicative of future results<\/p>\n\n\n\n

Home Searching Activity Increases<\/strong><\/h2>\n\n\n\n

Potential home buyers dove into the market last month with the pace of contract signings gaining steam from February\u2019s recovery. The National Association of Realtors reported that pending home sales grew 3.4% month over month, exceeding estimates of 0.3% by a wide margin and the prior month\u2019s 1.6%. On a year-over-year (y\/y) basis, though, pending sales rose just 0.1%, a return to longer-term growth following February\u2019s 7% y\/y decline. Pending home sales are a leading indicator of completed transactions, as contracts are signed prior to keys being turned over.<\/p>\n\n\n\n

\"Contract<\/figure>\n\n\n\n

Past performance is not indicative of future results<\/p>\n\n\n\n

Lukewarm Revenue Growth Hits Meta While Consumers Tighten Spending<\/strong><\/h2>\n\n\n\n

Facebook and Instagram parent Meta reported disappointing revenue guidance, causing its share price to drop approximately 12% and pull down shares of other tech companies. Meanwhile, consumers appear to be increasingly pushing back against price increases as illustrated by earnings commentary from Comcast and Nestle. The earnings calls came shortly after PepisCo<\/a> also said customers were balking at price hikes. Other businesses, however, have been successful with boosting prices. Just this morning, Chipotle said it generated strong sales despite having increased its prices. The following highlights illustrate these points:<\/p>\n\n\n\n