Fourth-quarter GDP grew a bit less than expected, but consumer spending was solid, the Bureau of Economic Analysis reported Thursday. The Federal Reserve's key inflation rate for the fourth quarter matched expectations. The inflation data offers a preview of Friday's December reading of the core PCE price index. The S&P 500 rose 0.7% in Thursday morning stock market action.
Some economists had sharply downgraded their Q4 GDP forecasts after a big jump in the trade deficit last month, which analysts attributed at least partly to importers trying to front-run new Trump tariffs that could take effect on Feb. 1.
8:55 a.m. ET
Updated Fed Rate-Cut Odds
After the quarter GDP and inflation data, markets are still only pricing in 18% odds of a rate cut at the March 19 Fed meeting, according to CME Group's FedWatch tool. Odds stand at 43% for a rate cut on May 7. For the June 18 meeting, odds of a rate cut are at 71%.
The bottom line is that today's data didn't really change anything. Lower initial claims and strong consumption don't make the Fed any more likely to cut.
8:50 a.m. ET
Consumers Binge On Goods
Personal consumption was driven by a 6.6% annualized increase in goods purchases, including a 12.1% jump in spending on durable goods. Services spending rose at a 3.1% annual rate.
8:47 a.m. ET
10-Year Treasury Yield Slips
The 10-year Treasury yield backtracked to 4.51% from 4.56% on Wednesday. While consumption was strong, there were some soft spots. Equipment investment fell at a 7.8% annual rate, the worst in more than three years. Investment in nonresidential structures slipped 1.1% after Q3's 5% fall.
The Boeing strike played a role in the plunge in equipment investment. However, equipment spending was still soft outside of aircraft, falling at a 2.4% rate, noted Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
8:43 a.m. ET
Initial Claims Dive
New claims for jobless benefits slid 16,000 to 207,000 from the prior week's figure. Economists expected 224,000.
8:36 a.m. ET
PCE Inflation In Line
The core PCE price index rose at a 2.5% annual rate. That matched Bloomberg's forecast.
Barring notable revisions, the core PCE reading suggests Friday's December inflation data will be in line with forecasts of a 0.2% rise.
Fed Chairman Jerome Powell noted on Wednesday that the past two month of inflation data have been good, including December.
8:35 a.m. ET
GDP Growth Slows
Fourth-quarter GDP growth slowed to 2.3%, the government estimated, down from 3.1%. That was a touch lower than estimates, but personal consumption grew a strong 4.2%, the most since Q1 of 2023.
GDP, PCE Price Index Forecasts
Economists expect GDP growth of 2.6% in Q4, following 3.1% growth in Q3, according to Econoday. Personal consumption expenditures are seen rising a strong 3.1%.
The core PCE price index is seen rising at a 2.5% annual rate for the quarter, according to estimates posted by Bloomberg.
S&P 500
S&P 500 futures are up 0.2% early Thursday, helped by gains from Tesla and Broadcom, though Microsoft and Caterpillar are weighing on stock indexes.
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