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The Morning Shift: Q4 GDP +6.9% SAAR/December Durable Goods -0.9%/Russia PPI Slows/COVID Slowing
Q4 GDP Exceeds Even Hedgeye’s Street High Estimates, But December Durable Goods Slow
- Q4 U.S. GDP confirmed what we already knew, growth accelerated in the final quarter of 2021
- Initial Q4 GDP came in at a 6.9% SAAR (just ahead of our street high estimate), beating consensus of +5.3% and well ahead of Q3’s 2.3% → this is good for +5.5% Y/Y
- This was the fastest sequential increase since Q3 2020
- PCE price index increased +6.5%, compared with the prior increase of +5.3%
- Obviously a higher than expected Q4 GDP report, all else equal, likely increases the probability of a deceleration in Q1 2022
- And on that note, December U.S. Durable Goods Orders decelerated to -0.9% from +3.2% (revised higher) in November
- This is consistent with other data that we track (retail sales as an example) that have shown a slowing into December and January
- Orders for Durable Goods hit their lowest point since April 2020, largely driven by a -3.9% decline in transportation orders
- U.S. Jobless Claims for the w/e January 22nd ticked lower to 260K, from the upwardly revised prior week of 290K – still trending higher than Q4 lows
- We wrote about Fed Funds futures earlier this week and post Powell’s press conference . . . there are now +4.77 rates prices into the market for 2022 → an increase
- So the market took his hawkishness at face value, we would take the under on this actually happening. But if it does, going to be a looong year for equities!
- So far with 119 SP500 companies having reported for Q4 2021, revenue is up 10.8% Y/Y and earnings are up +23.6%
- As the table below shows, this is a serious rate of change slowdown from Q3 2021. On a projected basis, this rate of change slowdown troughs in Q2 2021
- Current Macro ETF positions: SHY, GLD, UUP, XLP, PBJ, BNDD, TLT, EIS, XLU, EWQ, IDX
Global PPI Peaking, Alongside Global COVID Cases
- Yesterday we did an update on global CPI and today we look at global PPI, which tells a similar story:
- Global PPIs into December are reaching a peak rate of change acceleration
- Beginning in April, they also start to see increasingly challenging comps
- On a rate of change basis alone, we should start to see global inflation slowing in the end of Q1 2022 and into Q2 2022
- To that point, Russia PPI decelerated to +28.5% in December from +29.2% in November → first sequential deceleration since the beginning of the pandemic
- Similar to other recent confidence readings in Europe, German Consumer Confidence for January accelerated slightly to -6.7 from -6.9
- China Industrial Profits (YTD) slowed to +34.3% Y/Y, from +38.0% Y/Y
- A slowing, but not all bad news as 32 of 41 industries saw profit rise
- No real change in global COVID cases, still in deceleration mode. Global cases W/W are +8% and U.S. cases are -18% W/W
