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Q1 GDP Increases Lower Than Expectations

·3 min read
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We kick off another trading day, basically in the heart of Q1 earnings season, with a couple key economic metrics for both the past week and past quarter. New jobless claims have buoyed a bit from last week’s release, but are nevertheless re-establishing post-pandemic lows. Meanwhile, the first look at Q1 Gross Domestic Product (GDP) came in hot… only not quite as hot as the “whisper numbers” were looking for.

First, Initial Jobless Claims: for the second week in a row, these weekly unemployment reads have set new lows since the pandemic effect took hold: 553K. However, this is because the previous week’s 547K — the previous pandemic low — was revised upward rather significantly to 566K. Still, after seven straight weeks averaging more than 700K new claims per week, this is the third straight week where we fell all the way through the 600Ks to a 5-handle on claims.

Continuing Claims have bumped up a bit from last week’s pandemic-low read, downwardly revised to 3.65 million, to 3.66 million in this latest print (a week in arrears from Initial Claims). Plenty of these longer-term unemployed are being sopped up by Pandemic Unemployment Assistance (PUA), which is a program that remains on the books for the time being. Overall, we’re still down roughly 8.5 million American jobs from February 2020 levels.

The first read on Q1 GDP came in at 6.4% — the highest quarterly total in nearly 18 years. Expectations, however, were for 6.5% on consensus, with many on the Street whispering they thought the quarter could report as high as 7%. Still, with personal consumption coming in at +10.7% for the quarter, this is the speediest rate of overall economic growth since the Reagan adminstration. That said, this is the first preliminary read; we can expect revisions in the two more prints to come.

But everything investors had been looking for appears to be coming into fruition: the price index of 4.1% was far ahead of the 2.5% expected (and more than doubled Q4’s 2%). Personal Consumption Expenditures in Q1 overall came in at 3.5%, 100 basis points higher than consensus. Held back temporarily by a 5% drop in fixed investment, Goods grew 24% while Services gained 4.6%. But we expect a big surge in Services in Q2 and beyond, as the Great Reopening continues apace.

Pending Home Sales will drop after the market opens today for March: +5.4% is expected — a big rebound from the -10.6% reported for February. Otherwise, the latest FAANG earnings report from Amazon (AMZN) comes out after today’s closing bell, looking for a blowout quarter on the level of Apple (AAPL), Alphabet (GOOGL) and Facebook (FB), and an improvement over Netflix’s (NFLX) relative disappointment.

Not a lot of time to discuss pre-market earnings reports this morning. Suffice it to say both Comcast (CMCSA) and Caterpillar (CAT) both gained in early trading on favorable quarterly results. Comcast saw an increase in wireless subscribers in the quarter, while Caterpillar saw a rise in machinery sales.

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Comcast Corporation (CMCSA) : Free Stock Analysis Report

Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

Apple Inc. (AAPL) : Free Stock Analysis Report

Caterpillar Inc. (CAT) : Free Stock Analysis Report

Netflix, Inc. (NFLX) : Free Stock Analysis Report

Facebook, Inc. (FB) : Free Stock Analysis Report

Alphabet Inc. (GOOGL) : Free Stock Analysis Report

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