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Q3 GDP +2.6%, Positive for the Year; SHOP, MCD Beat in Q3
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Thursday, October 27, 2022
It’s a very busy morning, so apologies if I eschew the conversation niceties. There’s a lot to get to:
Q3 Gross Domestic Product (GDP) came in stronger than expected at +2.6%, from +2.3% expected and -0.6% for the final print of Q2. This is the first headline Q3 GDP figure, so it is subject to change upon further examination. But for now, we’ve managed to swing to positive GDP for the year after two straight quarters of negative growth (-1.6% in Q1).
This is particularly heartening considering all the headwinds we know exists in the economy these days: housing, inventories, business investment, trade deficits. We also have a globally strong dollar that is likely to work against U.S. goods-producing versus cheaper alternatives. But for now, we’ll take the W.
Pricing reached +4.1% in Q3, which is gratefully well off the +9.0% we saw in Q2, which was the highest print we’d seen since 1981. So here again, we can see we’re off 40-year inflation heights. Core Personal Consumption Expenditures were in-line at +4.5%, down from Q2’s +6.0%. Again, more evidence the Fed’s interest rate hikes are having their desired effect.
Even better — at least so far — is than near-term employment doesn’t seem to be harmed in the least by any of these drawdowns: 217K Initial Jobless Claims last week was fewer than expected, though up slightly from the unrevised 214K the previous week. Continuing Claims did ratchet up to 1.44 million, from a downwardly revised 1.39 million the previous week, but we’re still in robust labor market territory with these figures.
Next week’s monthly payroll reports — first from the ADP (ADP - Free Report) in the private sector and then on Friday from the U.S. government — will articulate much of this further. We seem to have dimmed inflation somewhat while employment stays strong. That’s for now, however, as I alluded to above: job cuts are typically on the backside of an economic downturn. Companies don’t layoff workers unless they’re certain they have to.
Durable Goods Orders for September came in short of expectations: +0.4% on headline, beneath the +0.7% expected but stronger than the -0.2% reported the previous month. Ex-transportation, this number plummets to -0.5%. Core capital equipment orders really tumbled: -0.7% versus a big downward revision to +0.8% the previous month. Shipments were -0.5%. More inflation-fighting economic weakness. The Fed is likely putting this in the “Pro” (vs “Con”) column.
Shopify (SHOP - Free Report) shares are +6.5% in early trading on a slimmer-than-expected loss on the bottom line and a notable beat on the top: -$0.02 per share is a big improvement from the expected -$0.07, while $1.4 billion in sales demonstrates +22% growth year over year. Gross Merchandise Volume came in +11% year over year; the company expects GMV to outperform broader U.S. retail going forward.
McDonald’s (MCD - Free Report) is also up this morning, +2.3%, on its Q3 beat on earnings and sales: $2.68 per share outperformed the Zacks consensus by 11 cents, with revenues of $5.87 billion a big improvement over the $5.71 billion expected. Same-store sales at +6.1% was well ahead of the expected +3.6%, partially on higher pricing, while International business surprised to the upside, +8.5% versus +5.6%. Mickey D’s also increased its cash dividend +10%.
Pre-markets are a tale of strong Q3 earnings results in some areas and weakness in others: the Dow is currently +300 points at this hour, the S&P 500 is +12 and the Nasdaq is -20 points. Disappointments in ex-FANG stocks are having a negative effect of the tech-heavy Nasdaq.
Image: Shutterstock
Q3 GDP +2.6%, Positive for the Year; SHOP, MCD Beat in Q3
Thursday, October 27, 2022
It’s a very busy morning, so apologies if I eschew the conversation niceties. There’s a lot to get to:
Q3 Gross Domestic Product (GDP) came in stronger than expected at +2.6%, from +2.3% expected and -0.6% for the final print of Q2. This is the first headline Q3 GDP figure, so it is subject to change upon further examination. But for now, we’ve managed to swing to positive GDP for the year after two straight quarters of negative growth (-1.6% in Q1).
This is particularly heartening considering all the headwinds we know exists in the economy these days: housing, inventories, business investment, trade deficits. We also have a globally strong dollar that is likely to work against U.S. goods-producing versus cheaper alternatives. But for now, we’ll take the W.
Pricing reached +4.1% in Q3, which is gratefully well off the +9.0% we saw in Q2, which was the highest print we’d seen since 1981. So here again, we can see we’re off 40-year inflation heights. Core Personal Consumption Expenditures were in-line at +4.5%, down from Q2’s +6.0%. Again, more evidence the Fed’s interest rate hikes are having their desired effect.
Even better — at least so far — is than near-term employment doesn’t seem to be harmed in the least by any of these drawdowns: 217K Initial Jobless Claims last week was fewer than expected, though up slightly from the unrevised 214K the previous week. Continuing Claims did ratchet up to 1.44 million, from a downwardly revised 1.39 million the previous week, but we’re still in robust labor market territory with these figures.
Next week’s monthly payroll reports — first from the ADP (ADP - Free Report) in the private sector and then on Friday from the U.S. government — will articulate much of this further. We seem to have dimmed inflation somewhat while employment stays strong. That’s for now, however, as I alluded to above: job cuts are typically on the backside of an economic downturn. Companies don’t layoff workers unless they’re certain they have to.
Durable Goods Orders for September came in short of expectations: +0.4% on headline, beneath the +0.7% expected but stronger than the -0.2% reported the previous month. Ex-transportation, this number plummets to -0.5%. Core capital equipment orders really tumbled: -0.7% versus a big downward revision to +0.8% the previous month. Shipments were -0.5%. More inflation-fighting economic weakness. The Fed is likely putting this in the “Pro” (vs “Con”) column.
Shopify (SHOP - Free Report) shares are +6.5% in early trading on a slimmer-than-expected loss on the bottom line and a notable beat on the top: -$0.02 per share is a big improvement from the expected -$0.07, while $1.4 billion in sales demonstrates +22% growth year over year. Gross Merchandise Volume came in +11% year over year; the company expects GMV to outperform broader U.S. retail going forward.
McDonald’s (MCD - Free Report) is also up this morning, +2.3%, on its Q3 beat on earnings and sales: $2.68 per share outperformed the Zacks consensus by 11 cents, with revenues of $5.87 billion a big improvement over the $5.71 billion expected. Same-store sales at +6.1% was well ahead of the expected +3.6%, partially on higher pricing, while International business surprised to the upside, +8.5% versus +5.6%. Mickey D’s also increased its cash dividend +10%.
Pre-markets are a tale of strong Q3 earnings results in some areas and weakness in others: the Dow is currently +300 points at this hour, the S&P 500 is +12 and the Nasdaq is -20 points. Disappointments in ex-FANG stocks are having a negative effect of the tech-heavy Nasdaq.
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