Though this morning's economic data was mixed, growth is clearly weak. The advance report on fourth quarter Gross Domestic Product showed weak growth of 0.6%, half of the consensus estimate of 1.2%. But employment is hanging in there, as ADP reported 130,000 new jobs in January, reinforcing the lack of job layoffs indicated by recent data on claims for unemployment insurance.
The big drivers for the weak GDP report were large declines in home construction and inventories, subtracting 1.2 and 1.3 percentage points from GDP, respectively. Consumer spending rose 2% and business investment rose 7.5%. This report boosts odds of a 50 basis point cut in Fed Funds today at 1:15 p.m.
Bottom line is the housing fallout is spreading to the overall economy, but low inventories and low unemployment claims are encouraging. A cautious approach to equity markets remains warranted.
This morning, our Chairman, Drew Kanaly, appeared on the CNBC's "Squawk on the Street." Click on the link to hear what he said about the Fed meeting and other top issues.
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