Jobless claims fall, GDP revised lower, durables orders soar

Key Concepts:

• Durable Goods Orders: Orders for manufactured goods expected to last at least three years.
• Trade Balance: The difference between a country's imports and exports.
• Capital Goods Orders (Nondefense): Orders for capital goods excluding those for defense purposes.
• GDP (Gross Domestic Product): The total value of goods and services produced in a country.
• Consumption: Household spending on goods and services.
• Price Index: A measure of the average change in prices over time.
• PCE Core (Personal Consumption Expenditures Core): A measure of inflation that excludes volatile food and energy prices.
• Initial Jobless Claims: A measure of the number of people filing for unemployment benefits for the first time.
• Continuing Claims: A measure of the number of people receiving unemployment benefits for more than one week.
• Wholesale Inventories: Goods held by wholesalers for resale.
• Retail Inventories: Goods held by retailers for sale to consumers.

Durable Goods Orders:

• Preliminary durable goods orders surged by 16.4%. This is described as a "huge" number, unprecedented in recent history.
• The surge is likely distorted by orders for airlines, airplanes, and transportation equipment.
• Excluding transportation, durable goods orders increased by 0.5%, which is still considered a strong number, the strongest since September of the previous year.
• Capital goods orders (nondefense) increased by 1.7%, the second strongest number of the year, with January being the strongest at 1.8%.

Trade Balance:

• The trade balance was -$96.6 billion.
• While still a large deficit, it is not a record; the record was -$161 billion in March.

GDP (First Quarter, Third Revision):

• The third revision of first-quarter GDP came in at -0.5%.
• The initial estimate was -0.2%, which was then revised down.
• This decline is attributed to issues with imports and exports, potentially related to tariffs.
• -0.5% would be the weakest GDP since the first quarter of 2022.

Consumption, Price Index, and PCE Core:

• Consumption dropped to 0.5% from 1.2%, which is considered "shocking" as it is less than half of the previous figure.
• The price index increased to 3.8%, up from 3.7%.
• The PCE core increased to 3.5%, up from 3.4%. These are described as "large revisions" for the third GDP revision.

Initial Jobless Claims:

• Initial jobless claims decreased to 236,000.
• This is lower than the expected 246,000 (revised down to 245,000).
• 236,000 is the smallest number since mid-May of the current year.
• Continuing claims remain over 1.9 million (1,974,000), marking the fifth consecutive week above this level, a trend dating back to 2021.
• While 1.9 million seems high, it is not historically a high level.

Inventories:

• Wholesale inventories decreased by 0.3%.
• Retail inventories increased by 0.3%.
• These changes are not considered to provide significant information.

Market Reaction:

• Yields moved up slightly, possibly due to the hotter-than-expected pricing issues within the GDP number.
• Pre-opening equities are "pretty darn green," indicating a positive market sentiment.

Conclusion:

The data presents a mixed picture. Durable goods orders showed a significant surge, although distorted by transportation orders. The trade balance remains a large deficit. GDP contracted, driven by import/export issues. Consumption slowed significantly, while inflation measures (price index and PCE core) edged higher. Initial jobless claims decreased, while continuing claims remain elevated. The market reaction is tentatively positive, with yields moving up and equities showing pre-opening gains.