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Oasis of Economic Data, Plus BBBY Sells Off

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Thursday, September 27, 2018

Trudging through the desert of economic news for the past few weeks, this morning we come upon a veritable oasis of new data. Of course, this also comes a day after the Fed raises rates another quarter-point (to a 2.00-2.25% range), although nothing in this morning’s numbers would have been likely to move the needle for any of the FOMC participants.

Starting with those figures we see every Thursday morning, Initial Jobless Claims tacked up a bit last week from the near-50-year lows we’d been seeing for a month or longer: 214K is up 12K from the slightly upwardly revised 202K — still within the ultra-low range of 200-225K we’ve been in for much of 2018 so far, but up notably from the near-sub-200K numbers that were leading the narrative of our continuing robust U.S. labor market.

In fact, we may be seeing the first ripples of jobless claims coming in from the thousands of displaced workers in the coastal Carolinas in the wake of Hurricane Florence touching ground two weeks ago. This is obviously a hindrance to the region’s workforce, but if past storms are any indication, these negative numbers will represent a temporary blip.

Continuing Claims last week reached 1.66 million, up slightly from last week’s initial read but still well below historical norms. No danger to domestic employment from this perspective.

The headline number for Durable Goods orders for August was more than twice what analysts were expecting — +4.5% from the consensus +2.1%. However, strip away Transportation costs and this figure melts away to +0.1%. Even worse: Capital Goods, non-Defense, ex-Aircraft (a proxy for corporate business spending) reached only -0.5%, way down from last month’s +1.5%. Shipments also came to +0.1%. Clearly, the costs of transportation are taking all the gains from this metric, at least from a month ago.

We also see a second revision to Q2 GDP this morning, posting +4.2% — exactly what the first revision showed us, and still the highest-performing quarter since Q3 2014. Personal Consumption reached +3.8%, the Price Index was +3.0% and PCE came to +2.1% (up 10 basis points). Yet with a ratcheting up yesterday of the Fed’s estimate for full-year 2018 GDP rising from 2.8% previously to 3.1% now, nobody’s worried about a lack of economic growth in the U.S., near term.

Out latest Trade Balance (for August) crashed surprisingly lower than expected to -$75.8 billion, well below the expected -$70.6 billion and the July read of -$72.0 billion. With so many moving pieces to these numbers, it would be premature to affix any blame on trade policies for the dip. What we will look toward are trends emerging in these metrics, especially as trade tariffs begin to hit the bottom line in the U.S.

In earnings, yesterday after the bell Bed Bath & Beyond (BBBY - Free Report) disappointed investors with a 26.5% negative earnings surprise, to 36 cents per share, and more than 50% off last year’s 75 cents for the quarter. Revenues also missed the mark, albeit marginally, to $2.94 billion — exactly what the year-ago top line brought forth. As a result, pre-market trading for the specialty retailer has sent the stock down 16%. For more on BBBY’s earnings, click here.

Mark Vickery
Senior Editor

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