The economy ended on a strong note. Fourth quarter GDP increased at an annualized rate of 2.3% after rising 3.1% in the prior three-month period. The median forecast called for a 2.6% growth rate.
On the surface it appears this was a miss, but the details suggest otherwise.
Inventories subtracted a full percentage point from growth. Inventories were expected to add to growth. This could be interpreted two different ways. The lack of inventory accumulation suggests that companies are bearish on economic prospects. Or it can be interpreted bullishly…inventories stores must be replaced.
Sentiment surveys are strong with growing expectations that the Trump Administration will be able to deliver economically thus negating the former reason as to why inventories subtracted from growth.
The strike at Boeing was also a major detractor as production for aircraft slumped by 69%.
Consumer spending, which comprises the largest share of the economic activity advanced by 4.2%–the first time since late 2021 that outlays have exceeded 3% in consecutive quarters. The acceleration was the biggest since early 2023.
A closely watch measure of underlying inflation met expectations, rising by 2.5%. This data point was positively interrupted, stating that it is only the second quarterly rise since late 2022.
However, it did rise not decline, thus suggesting inflation is not waning as many had forecasted, the result of the most aggressive Federal Reserve in history.
The economy grew 2.8% in 2024 after expanding 2.9% and 2.5% in prior two years, respectively.
The averages were nominally higher yesterday, partially the result of mixed interpretations of profit reports from META, TSLA and MSFT. However, over 80% of S & P 500 companies rose yesterday, the result of the GDP data.
The Treasury market was largely unchanged.
After the close AAPL released results that generally exceeded expectations. Shares are up about 2.5%.
Last night the foreign markets were up. London was up 0.35%, Paris up 0.50% and Frankfurt up 0.27%. China was down 0.06%, Japan up 0.15% and Hang Seng up 0.14%.
Dow and NASDAQ futures are up 0.2% and 0.35%, respectively ahead of the PCE data, the Employment Cost Index and personal income/spending statistics. The 10-year is off 4/32 to yield 4.53%.
