Weekly Update 03/28/2025: Markets React to News
- AT&T in talks for acquisition
- GDP grows in Q4
- PCE shows acceleration
Economic News
The third and final revision to fourth quarter 2024 gross domestic product (GDP) showed that the economy was performing well in the last three months of the year. On an annualized basis, in the October to December timeframe, GDP rose 2.4% according to the Bureau of Economic Analysis. After-tax profits for corporations rose 5.9%, which is the most in more than two years. Higher profits may have been driven by activity that got pulled into the quarter from future periods in anticipation of potential tariffs. Consumer spending, which represents two thirds of GDP, rose 4.0% on an annual basis. Residential investment rose 5.5%.
Meanwhile, initial claims for unemployment insurance fell to 224,000 for the week ended March 22 according to the Department of Labor. That was only slightly down from the 225,000 in the week prior and below the Wall Street estimate of 230,000. Continuing claims for the week ending March 15 fell by 25,000 to 1.86 million on a seasonally adjusted basis. What are the effects of the administration’s focus on efficiency? Here is a take from the Bloomberg economics group: “Applications for unemployment benefits filed by federal employees, known as UCFE claims, cooled to 821 in the week ended March 15 (vs. 1,066 prior). The figure is set to surge ahead, though the timing is uncertain. For example, dismantling the Education Department — which employs about 4,100 federal workers — won’t mean an immediate surge in jobless applications since workers will receive pay until June 9, as well as substantial severance pay or retirement benefits. For the week ended March 8, federal workers filed 9,135 continuing jobless claims — a proxy for the number of people receiving unemployment benefits — up from 8,648 a week earlier, as laid-off workers struggle to find new jobs. That’s up significantly from 6,241 a year ago.” In other words, uncertainty continues to reign and digging into the numbers is the only way to really get a true picture of how the economy is doing and what may lie ahead.
New homes sales rose just 1.8% in February according to data from the Commerce Department. That was after that statistic fell 6.9% in January likely due to poor weather across much of the U.S. The media sales price fell 1.5% from last year to $414,500 as builders are still facing high mortgage rates and a cautious consumer creating “affordability concerns” in the industry. In February, purchases rose in the South, the country’s biggest homebuilding region, and the Midwest. In order to help move inventory, builders are cutting prices more often in order to clear out “spec homes,” which are residences built without any specific customer in mind. The supply of new homes reached 500,000 last month, the highest level since 2007. With consumer confidence falling in March to the lowest level in four years, according to surveys from the Conference Board, headwinds are likely to remain in the industry unless some further mortgage rate relief develops in the coming months.
The main focus this week was on the release of the inflation figures that the Federal Reserve favors—the personal consumption expenditures index (PCE). While data from the Consumer Price Index and Producer Price Index can lead economists to a fairly accurate picture of what the PCE will be, the release and realization of the actual data captures the market’s attention. Core PCE, which excludes food and energy items, rose 0.4% in February from January according to the Bureau of Economic Analysis. That was up 2.8% from the year-ago level. Both those figures were 0.1% above the consensus view captured in a Bloomberg survey of economists. Headline PCE was in-line with expectations, rising 0.3% month-to-month and 2.5% year-over-year. Services remain the “sticky” portion of inflation that the Fed continues to chip away at but has not been able to solve just yet. An uptick in health care costs, primarily at hospitals, accounted for some of the core acceleration. So-called supercore PCE—which are core services excluding housing—rose 0.4% in February, up from the 0.2% rise in January.
Personal income rose a healthy 0.8% in February, following the 0.7% rise in January. Most of the income growth was driven by increases in wages and salaries. Consumer spending rose 0.4% last month, following a 0.3% drop in January, which is partially as a result of poor weather that kept a lot of shoppers at home and apparently not online browsing. The personal saving rate rose from 4.3% in January to 4.6% in February as consumers, facing an uncertain economic picture, began to focus on what they can stuff in the mattress for a potential rainy day. The question markets needs answered is if pending tariffs will make the inflationary picture worse or will consumers cut back, potentially robbing GDP of the momentum from the fourth quarter? Stay tuned.
Company Events
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