Initial estimates for first quarter GDP is released at 8:30. Will this data be insignificant given that the statistics were collected largely before the tariffs went into effect?
Inventory accumulation is a positive addition to GDP. Inventory reduction is negative. Imports are negative to GDP and exports are positive addition.
Yesterday’s trade data indicated a greater than expected widening of the trade deficit to a record during March as companies continued importing goods to get ahead of tariffs.
The shortfall in goods trade grew 9.6% from a month earlier. Imports rose 5%, led by a record surge in consumer goods. Exports increased by 1.2%
The data prompted many economists to further downgrade their forecasts for first quarter economic activity. The median projection calls for a 0.3% increase in GDP, the slowest pace since 2022.
Wholesale inventories in March rose by 0.5% versus the expectation of a 0.6% increase. Retail inventories however fell by 0.1% rather than rising by 0.4%.
Depending upon one’s predisposed outlook, inventory accumulation or lack of thereof can be viewed either bullish or bearish. A rise in inventory suggests that production may have to slow to work off the goods and vice versa.
Consumer confidence fell more than expected to the weakest level since May 2020, falling for the fifth straight month, the longest stretch since 2008. The measure of inflation expectations rose to the highest since November 2022.
Finally regarding jobs, the JOLTs Job Openings Rate was lower than anticipated however “the quit rate” or the workers voluntarily quitting their jobs was greater than expected. In other words, it was mixed.
The data caused Treasuries to rally across the curve, nominally increasing the odds of rate reduction in June.
Equites were quietly volatile ahead of the GDP data, the release of earnings from four of the Magnificent Seven that comprise about 22% of the S & P 500 capitalization and Friday’s jobs data.
Bloomberg writes the last six days has been the best advance for the S & P 500 since March 2022—with the gauge up about 7% on an “oversold bounce.”
Is it about to become real, defined as a massive storm is about to hit the global economies because of the trade war?
All will get hurt but the question is who may be hurt more. Many believe the world needs us more than we need the world. A dated statistic suggests that 45% of China’s production is slated for exports to the US, Europe and Japan.
Chinese trade with the US was already down about 25% from levels five years ago even before the President was re-elected.
The newswires are filled with anecdotal evidence that Chinese imports have stopped to the US with many proclaiming that shortages of goods and higher prices are all but inevitable.
Perhaps the only certainty to write is no one knows the outcome. The global trading system is accelerating its dramatic change, a change that first commenced in 2008, accelerated in 2012, and went on steroids in 2020/21. And then there is today.
As discussed many times, the last 30 years is the only time that countries exported their vital industries to their perceived adversaries.
Since 2020 the West has weaponized the flow of capital, and the East has weaponized the flow of product.
Price is no longer the primary determinant of a purchasing decision, replaced by availability and reliability.
The outcome in unquantified.
What will happen today?
Last night the foreign markets were up. London was up 0.19%, Paris up 0.70% and Frankfurt up 0.74%. China was down 0.23%, Japan up 0.57% and Hang Seng up 0.515.
Dow and NASDAQ futures are flat and down 0.60% ahead of the data and several significant earnings releases. The 10-year is up 5/32 to yield 4.15%.
