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Q4 GDP at +6.9%; Jobless Claims, Durable Goods Lower

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Thursday, January 27, 2022

We have lots of economic data to absorb this morning, from jobless claims to Durable Goods Orders to a new GDP print. Most of this hits the tape better than expected, although it may be worth considering how much of this info comes from prior to the Omicron variant coursing through the veins of the economy.

The first look at seasonally adjusted, annualized Q4 Gross Domestic Product (GDP) is a good example of this: +6.9% on the headline is 140 basis points higher than expected, and 3x times higher than Q3’s +2.3%. This looks to be the best full-year of GDP since 1984. Consumption came in at +3.3%, well ahead of the +2.0% the previous quarter. The GDP Price Index was also +6.9%, the strongest we’ve seen in over 40 years.

Because much of this +6.9% consists of inventories (which will come off future GDP reads if goods take time being sold), this may be considered a slightly deceptive high read. Also keep in mind the Omicron variant was only first discovered with five weeks left in calendar Q4, and had not hit our shores with any negative affects until a few weeks later, likely beyond the scope of this report. This is one reason we get two revisions going forward; with such a hot headline number, odds are these revisions will bring this down somewhat on a more articulated consideration.

Durable Goods Orders for December, on the other hand, were way down month over month: -0.9% is a big swing from the +2.6% reported for November. Perhaps some of this was pulled forward due to early shopping during the holidays, and this time of year we do see distortions in certain aspects of economic demand. Ex-transportation, though, swings back up to +0.4%, and planes and autos do have a large impact on these sorts of reads, adding to volatility. So perhaps we’re a little stronger than the headline here would suggest.

Initial Jobless Claims dropped to 260K last week, a full -30K from the upwardly revised 290K reported a week ago. Again, this is a time of year that tugs on these numbers near-term, with holiday hiring being rolled back and the winter months taking hold in much of the country. But clearly we’re well off the post-Covid lows seen the first week of December, which was 188K — though this period is also within the realm of holiday distortions.

Continuing Claims of 1.675 million is also an upswing from previous cycle lows, and higher than the downwardly revised 1.624 million reported the previous week. The same issues in re seasonal static apply here, and to gain near-term scale, we saw 1.551 million longer-term jobless claims made the week between Christmas and New Years — a pandemic low that will be a challenge to beat without seasonal considerations.

This afternoon we get fiscal Q1 earnings results from Apple (AAPL - Free Report) , still arguably the most important company in the world — not only for the way the iPhone has altered social discourse but that it has done so completely globally. Even with the stock down -10% from the start of the year, Apple boasts a $2.6 trillion market cap.

In any case, expectations for Apple’s Q1 are earnings of $1.89 per share on $118 billion in quarterly sales. The company has not missed a consensus earnings estimate for nearly six years. A breakdown of product sales, gross margins, etc. will be forthcoming on today’s report. It will also help color-in some aspects of the global economy through the end of calendar 2021.

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