GDP and durable good numbers are masking weakness
Advance GDP for Q4 printed at 2.9% q/q. This is lower than the previous 3.2% for Q3, but higher than the forecast of 2.6% q/q. Durable goods came in at 5.6% m/m - much higher than the expected 2.4% m/m.
However, the data is hiding weakness.
Consumer spending was lower than expected at 2.1% (2.9% - forecast), and there is a noticeable buildup in inventories.
Given the weaker consumption, the inventory increase is likely unplanned. It is probably because of unsold inventories, an early sign of recession.
Regarding durable goods, Boeing received 250 aircraft orders. When this is stripped out, core durable goods declined, marking at -0.1% m/m. This is down from the previous month, which was 0.1% m/m.
At first glance, the GDP and core durable good numbers look encouraging. However, beneath the surface, there are worrying signs.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.
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