Modestly disappointing economic numbers were released today ahead of tomorrow’s report on first quarter GDP. Not that much seems to matter with the market transfixed by wrangling in Washington over a potential government shutdown, a possible Saturday vote in the House of Representatives on repealing and replacing Obamacare and speculation just about everywhere on what President Donald Trump’s one-page tax cut proposal from yesterday actually means in terms of policy proposals.
Oh, and everyone is waiting for earnings from Alphabet (GOOG) and Amazon (AMZN) after the close today.
As of 2:35 p.m. New York time, the Standard & Poor’s 500 index was up 0.11%
Back to today’s numbers, then.
March orders for durable goods climbed 0.7%. That was below the 1.2% gain expected by economists surveyed by Briefing.com. Orders without the always volatile transportation sector fell 0.2%. Economists were looking for a gain of 0.4% in ex-transportation orders. Business spending remains soft with an increase of just 2.1% year over year.
Weekly initial claims for unemployment ticked up to 257,000 from 243,000 last week. Economists had been expecting 242,000 new claims for unemployment. But a level of new claims of around 250,000 is an indication that the labor market remains tight.
The Commerce Department is set to release its initial report on first quarter GDP tomorrow at 8:30 a.m. Washington time. Economists surveyed by Briefing are looking for growth of 1.1% year over year. Growth in the fourth quarter was at a rate of 2.1%. The Atlanta Federal Reserve Bank’s GDPNow forecast is for a much lower 0.5% growth rate.
My sense is that the market has already decided to look past the first quarter GDP number on the grounds that first quarter growth is always weak and that growth will pick up later in 2017. A reading near the Atlanta Fed’s forecast might be enough to raise concern, however.
A weak GDP number might be of more importance in Washington than on Wall Street where the brief outline of Trump administration tax cuts would seem to depend on strong, above-trend economic growth not to blow out the budget deficit. It becomes harder to argue for tax cuts that require growth of 3% or better to offset lower tax rates when the economy has just turned in a 1% quarter.