Q1 GDP Slows to 1.4% as Initial Claims Fall, Durable Goods Orders Rise

Economic Update: Q1 2024 GDP, Unemployment Claims, and Durable Goods Orders

The latest economic data from the Bureau of Economic Analysis (BEA) and the Labor Department provides a mixed picture of the U.S. economy in early 2024. The reports cover the revised GDP growth for Q1, weekly unemployment claims as of June 22, and durable goods orders for May, offering insights into the economic landscape and potential future trends.

GDP Growth

The BEA’s “third” estimate for Q1 2024 shows real GDP increased at an annual rate of 1.4%. This is a downward shift from the 3.4% growth in Q4 2023, but an upward revision from the previous 1.3% estimate. The adjustment reflects lower imports, higher nonresidential fixed investment, and increased government spending, partially offset by a reduction in consumer spending. Nonresidential investments and government expenditures were strong contributors, highlighting a shift in economic drivers. The overall GDP growth slowdown suggests a cautious outlook for the upcoming quarters, with potential external economic pressures and fluctuating consumer spending playing significant roles. The outlook remains bearish, as the slower growth and reduced consumer spending indicate possible headwinds for the economy.

Unemployment Claims

For the week ending June 22, seasonally adjusted initial unemployment claims fell to 233,000, 3,000 below market expectations of 236,000, and 6,000 below the previous week’s revised level of 239,000. Despite this decrease, the 4-week moving average rose to 236,000, up by 3,000 from the previous week’s revised average, indicating a gradual increase in jobless claims. The insured unemployment rate remained stable at 1.2%, but the number of insured unemployed rose by 18,000 to 1.839 million, the highest level since November 2021. This increase points to underlying weaknesses in the labor market. Given the rising 4-week moving average and the increase in insured unemployment, the outlook for the labor market is bearish, signaling potential challenges in employment stability.

Durable Goods Orders

In May 2024, new orders for manufactured durable goods rose by 0.1%, or $0.3 billion, to $283.1 billion, marking the fourth consecutive month of growth. However, excluding transportation, orders decreased by 0.1%, and excluding defense, they dropped by 0.2%. Transportation equipment, up three of the last four months, drove the overall increase with a 0.6% rise to $95.4 billion.

This sector’s performance offset declines in other areas, underscoring its critical role in driving durable goods growth. The report is seen as positive, surpassing expectations and indicating sustained demand in key sectors.

The consistent rise in durable goods orders, especially in transportation equipment, suggests ongoing industrial demand and economic resilience in manufacturing. The outlook is bullish, with the continued increase in orders signaling strength in manufacturing and potential for sustained economic growth.

Conclusion

The mixed economic data from Q1 2024 reflects both strengths and weaknesses. While GDP growth has slowed, and unemployment claims indicate potential labor market challenges, the steady rise in durable goods orders suggests resilience in manufacturing. Traders should remain cautious but watchful for opportunities, particularly in the durable goods sector.