Q4 2023 GDP Beats Expectations
The second and final revision to Q4 2023 Gross Domestic Product (GDP) came out this morning, jumping 20 basis points (bps) from the prior read to +3.4%. Expectations were for the previous +3.2% to stand pat, but alas — the economy in the last quarter of last year was too strong. Still, this is a big come-down from the previous quarter: Q323 came in at +4.9%. By comparison, the final quarter’s GDP ahead of the Covid pandemic — Q4 2019 — was a relatively minor +2.6%.
The figure for quarterly Consumption came up 30 bps from the last look, to +3.3%. The Price Index, on the other hand, was quite consistent: +1.6%, which was expected and also the number that came in for the prior print. The PCE Price Index quarter-over-quarter reached +2.0% from +2.1% on the last look. These numbers from the U.S. Bureau of Economic Analysis (BEA), which is currently preparing the full Personal Consumption Expenditures (PCE) report to be released Friday morning.
Elsewhere, like any normal Thursday, Initial Jobless Claims once again came in lower than expected: 210K last week, 2000 fewer than the upwardly revised 212K reported for the previous week. These weekly numbers have not been higher than 220K since the last full week in January. A stronger-than-expected labor force — no doubt assisted by an historically high influx of immigrants to this country in recent months — has kept the labor market taut, at least on the jobless claims side.
Continuing Claims, reported a week in arrears from new jobless claims, jumped to 1.819 million from a downwardly revised 1.795 million the prior week. This is the highest weekly figure since mid-January, which was the last time longer-term jobless claims breached 1.82 million. Our highs over the past year were from November of last year — 1.93 million — which, still at sub-2 million, remain consistent with a healthy domestic workforce. The last time we were above 2 million longer-term claims was also in November… of 2021.
Overall, we certainly could be doing worse than having stronger-than-expected GDP and lower-than-expected jobless claims, but as any market participant from the past couple years should be aware, pre-market trading dislikes it. Trading levels went from +65 points on the Dow, +8 on the S&P 500 and +23 points on the Nasdaq to +38 on the Dow, +1 on the S&P and -20 points on the Nasdaq a half hour before today’s opening bell. Strong economic figures like these may cause the Fed to wait even longer before lowering interest rates from their 5.25-5.50% highs, where they’ve been since last summer and not this high since January of 2001.
That said, being the last trading day of the calendar quarter (tomorrow’s markets are closed in observance of Good Friday), we may have expected a bit of a profit-booking day anyhow. The S&P closed at a fresh all-time high Wednesday afternoon, reaching 5300 for the first time in history, at +10% from the start of the year. Bond yields remain relatively well behaved: still with a 40 bps inversion, but at 4.22% on the 10-year and 4.62% on the 2-year.
Finally, sentencing for convicted ex-CEO of FTX, Sam Bankman-Fried, is set today in New York City. Estimates are the former crypto magnate defrauded investors out of $10 billion, and sentencing will be anywhere from 11 to 100+ years in prison. This is your friendly reminded that crimes related to crypto trading — even on a massive scale, which can be harder to get one’s legal arms around — do get prosecuted. Look for cryptocurrency values to move up on this news.
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