Week of April 22 - 26, 2019

Maureen Kelliher, CFA

Maureen Kelliher, CFA

April 30, 2019

Weekly Economic Review

Weekly Macro Updates

Initial Jobless Claims (April 19) 200k est., 230k actual, 193k prior
Continuing Claims (Apr 20) 1682k est., 1655k actual, 1654k prior
Durable Goods Ex Transportation (Mar P) 0.2% est., 0.4% actual, -0.2% prior: R-
Capital Goods Orders Nondefense Ex Air (Mar P) 0.1% est., -0.2% actual, 0.2% prior: R+
Kansas City Federal Reserve Manufacturing Activity (Apr) 8 est., 5 actual, 10 prior
GDP Annualized QoQ (1Q A) 2.3% est., 3.2% actual, 2.2% prior
Personal Consumption (1Q A) 1.0% est., 1.2% actual, 2.5% prior
Personal Consumption Expenditure Core Deflator QoQ (1Q A) 1.4% est., 1.3% actual, 1.8% prior
Personal Income (Mar) 0.4% est., 0.1% actual, 0.2% prior
Personal Spending (Mar) 0.7% est., 0.9% actual, 0.1% prior
Personal Spending (Feb) 0.3% est., 0.1% actual, 0.3% prior: R+
PCE Deflator YoY (Mar) 1.6% est., 1.5% actual, 1.3% prior
PCE Core Deflator YoY(Mar) 1.7% est., 1.6% actual, 1.7% prior
Dallas Federal Reserve Manufacturing Activity (Apr) 10.0 est., 2.0 actual, 6.9 prior: R-

 Strong or Improving
 Inconclusive or lacking trend
 Weak or declining
R+ Revised up
R- Revised down

Capital Market Implications

Last week’s economic releases packed a surprise.  First-quarter gross domestic product grew at an annualized quarterly rate of 3.2%, which was well ahead of forecasts and much stronger than the 2.2% pace of growth in the fourth quarter. The number was impressive given the quarter included the government shutdown and waning benefits from the tax cuts, yet it wasn’t all wine and roses as the major contributors, net exports and inventories, tend to be transitory and thus not sustainable.  Personal consumption, a core component of GDP (consumer spending represents 70% of the economy), rose just 1.2% in the first quarter versus 2.1% in the prior quarter.  Although consumption contracted for the first quarter overall, it ended the quarter on a strong note, with both personal spending and retail sales rebounding sharply in March, up 0.9%.

Equity markets were mixed again last week, as earnings from 3M, a large Dow component, disappointed.  For the week, the Dow Jones Industrial Average ended flat while the S&P 500 Index gained 1.2%.  After several weeks of poor performance, health-care stocks surged and led the S&P 500 higher last week.  On the other hand, disappointing earnings reports weighed on several sectors including industrials and materials, which declined more than -1.0%.  Foreign stock markets also experienced a mixed performance, as developed markets were relatively unchanged while emerging markets fell -1.3%.  The yield on the 10-year Treasury note dipped to 2.5% last week, which sent bond prices higher.  The major sectors of the bond market including the Barclays Aggregate Bond Index, US corporate bonds and 10-year municipal bonds all rose more than 0.4% while high yield bonds, which are a proxy for stocks, increased 0.2%.