Peter Boockvar

The US economy grew by 2.9% q/o/q annualized, 3 tenths above the estimate but a breakdown of the components is key. Personal spending, the bulk of GDP, was up only 2.1%, 8 tenths less than forecasted with most being spent on services. Inventories added 150 bps to GDP growth, trade added 6 tenths as did government spending. With respect to private domestic investment, residential was a drag of 130 bps while there was no contribution from commercial structures. Equipment spending took off 2 tenths but spending on IP added 3 tenths. The headline deflator was up 3.5%, 3 tenths more than expected while core PCE was in line with the forecast of 3.9%.

Digging into GDP ex government spending and gross investment saw final sales to private domestic purchases grow just .2% in Q4, the slowest since it went negative in the first half of 2020 and December 2009 before that. Negative prints likely follow from here. Real final sales which takes out the influence of inventories grew by 1.4%.

Bottom line, Q4 GDP 2022 rose 1% (rounded from .96) from Q4 GDP 2021 on a real basis. I expect negative GDP prints from here in Q1 and Q2.

Initial jobless claims fell again to just 186k, 19k less than expected and vs 192k in the week before. The 4k week average is back below 200k at 198k, the lowest since May 2022. Continuing claims rose by 20k to 1.675mm.

The bottom line is the same. Outside of a few sectors, the pace of firing’s is modest and for those getting laid off in tech, they are finding new jobs quickly it seems and thus are not filing for claims. On the other hand, we know the level of hiring’s has slowed overall.

Treasuries are weaker with yields higher but after some volatility right after the data, the 10 yr yield is back to the 3.50% it was at just before. The 2 yr yield is about 2 bps above where it was at 8:29am est.

Initial Claims 4 week average