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Well, the debate is over: two successive quarters of negative GDP growth — we’re clearly in a recession… er, right? The first look at Q2 Gross Domestic Product (GDP) clangs a headline -0.9%, following -1.6% in Q1. It’s a back-of-the-envelope calculation, this notion that two negative-growth quarters in a row constitutes a recession, but analysts are hesitating in real time to paste the “big R” onto our current economic condition.
Renowned analyst Mohamed el-Erian this morning on CNBC put his finger on it: the economy is slowing “faster than expected.” A glance at how interest rate hikes over the past five months has begun to curb things like the Housing market, pretty much immediately, appears to have also brought down economic growth on a wider scale. And with another 75 basis-point hike yesterday, perhaps this is an even firmer push into “demand destruction” territory. And perhaps it’s a good thing the Fed has the month of August to reflect on things before its next meeting.
If only these interest rate moves could curb costs, right? Personal Consumption Expenditure Price Index numbers this morning brought in a still-very-high +8.7% year over year — the highest, in fact, since the +11% we saw back in 1981! Quarter over quarter, we see an in-line +4.4% — still very high for an economy supposedly shrinking at its current rate. These are the types of bumpy data points we might brace for into the coming months, until economic sectors can regain some equilibrium.
Initial Jobless Claims are down week-over-week but still raising the four-week moving average: 256K new jobless claims last week is down from the 261K the prior week, though that was revised up from 251K originally reported. No doubt about it: those days in mid-Spring of a mere 180K new claims is a thing of the past. Along with demand destruction, we’re seeing the labor force shed some payroll overhead.
The good news here is that Continuing Claims, coming in at 1.359 million — a drop of 25K week over week — is lower than expected, and historically in robust employment range. We’re up from the 1.31 million from a couple months ago, but allows for a silver lining in regard to Initial Claims: while more workers might be receiving pink slips these days, it looks like pivoting into a new position somewhere else is not too difficult in our current environment.
Pre-market trading dropped notably on this host of data, but have since buoyed back closer to even over the past half-hour or so. In some ways, this could be a silver lining: as stout savings accounts start getting burned through at a fast rate — and if we see a major drop-off in employment metrics prior to the Fed’s next meeting after Labor Day — the Fed may witness they very thing it was trying to foster, namely a muted economy in which runaway inflation does not have the oxygen in which to prosper.
A quick Q2 earnings report: Pfizer (PFE - Free Report) beat expectations on both top and bottom lines this morning, with earnings of $2.04 per share outpacing the Zacks consensus by more than +16% on $27.74 billion in revenues, +5.4%. This makes nine earnings beats in the last 12 quarters for the Big Pharma staple, though shares are down marginally in an overall slightly negative trading environment. For more on PFE's earnings, click here.
Image: Bigstock
Q2 GDP -0.9%, So We're in a Recession... Right?
Thursday, July 28, 2022
Well, the debate is over: two successive quarters of negative GDP growth — we’re clearly in a recession… er, right? The first look at Q2 Gross Domestic Product (GDP) clangs a headline -0.9%, following -1.6% in Q1. It’s a back-of-the-envelope calculation, this notion that two negative-growth quarters in a row constitutes a recession, but analysts are hesitating in real time to paste the “big R” onto our current economic condition.
Renowned analyst Mohamed el-Erian this morning on CNBC put his finger on it: the economy is slowing “faster than expected.” A glance at how interest rate hikes over the past five months has begun to curb things like the Housing market, pretty much immediately, appears to have also brought down economic growth on a wider scale. And with another 75 basis-point hike yesterday, perhaps this is an even firmer push into “demand destruction” territory. And perhaps it’s a good thing the Fed has the month of August to reflect on things before its next meeting.
If only these interest rate moves could curb costs, right? Personal Consumption Expenditure Price Index numbers this morning brought in a still-very-high +8.7% year over year — the highest, in fact, since the +11% we saw back in 1981! Quarter over quarter, we see an in-line +4.4% — still very high for an economy supposedly shrinking at its current rate. These are the types of bumpy data points we might brace for into the coming months, until economic sectors can regain some equilibrium.
Initial Jobless Claims are down week-over-week but still raising the four-week moving average: 256K new jobless claims last week is down from the 261K the prior week, though that was revised up from 251K originally reported. No doubt about it: those days in mid-Spring of a mere 180K new claims is a thing of the past. Along with demand destruction, we’re seeing the labor force shed some payroll overhead.
The good news here is that Continuing Claims, coming in at 1.359 million — a drop of 25K week over week — is lower than expected, and historically in robust employment range. We’re up from the 1.31 million from a couple months ago, but allows for a silver lining in regard to Initial Claims: while more workers might be receiving pink slips these days, it looks like pivoting into a new position somewhere else is not too difficult in our current environment.
Pre-market trading dropped notably on this host of data, but have since buoyed back closer to even over the past half-hour or so. In some ways, this could be a silver lining: as stout savings accounts start getting burned through at a fast rate — and if we see a major drop-off in employment metrics prior to the Fed’s next meeting after Labor Day — the Fed may witness they very thing it was trying to foster, namely a muted economy in which runaway inflation does not have the oxygen in which to prosper.
A quick Q2 earnings report: Pfizer (PFE - Free Report) beat expectations on both top and bottom lines this morning, with earnings of $2.04 per share outpacing the Zacks consensus by more than +16% on $27.74 billion in revenues, +5.4%. This makes nine earnings beats in the last 12 quarters for the Big Pharma staple, though shares are down marginally in an overall slightly negative trading environment. For more on PFE's earnings, click here.
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