Market 03/28: Q4/2023 GDP revised up - consumer spending and corporate earnings remain high

Fed official Waller: Should not rush to cut interest rates

Waller: Should not rush to ease monetary policy.

Reducing the total number of rate cuts or delaying them would be consistent with recent data.
Strong economic growth and robust labor market prevent the Fed from cutting rates too soon

Q4/2023 GDP strongly revised up, exceeding economists' estimates

1. GDP grows at a high rate in Q4 due to consumer strength

Final revision to real Q4/2023 GDP up from +3.2% Q/Q to +3.4% Q/Q, higher than economists' expected +3.2% Q/Q

The increase in Q4 reflects increases in consumer spending and local government spending.

While inventories were recorded as decreasing, strong import growth (counted as a negative “-” in GDP) caused net exports to decline.

2. GDP consumption remains strong accompanied by rising corporate profits: reason keeping inflation sticky high

High personal consumption + businesses still demanding high profits have kept prices on an upward trajectory as currently (sticky inflation). Specifically:

Core personal consumption expenditures component from GDP in Q4/2023 revised down from +2.1% to +2% Q/Q (same as previous quarter's growth).

… still a significant increase compared to the pre-Covid growth rate.

In particular, real personal consumption in the GDP basket calculated at 2012 chained USD reference values increased sharply to +3.3% Q/Q (previous figure: +3.0% Q/Q).

Corporate profits in Q4/2023 rise to highest level in history

with profit growth rate up to +5.1% Y/Y in Q4/2023, up from -0.56% previous quarter.

Corporate profit margins improved in Q4/2023, to 15.1%

In fact, nationwide real income - Gross Domestic Income (GDI) Q4/2023 increased +4.6% Y/Y (previous quarter: +3.1%) and much higher than GDP growth:

This week's jobless claims continue to remain at record lows

Initial jobless claims this week continue to remain low despite WARN layoff notices still being quite high:

Continuing claims rose slightly to 1.819 million people, higher than expected 1.815 million

UMich inflation expectations revised down to 3-year low

March inflation expectations revised down

1-year inflation expectations down from 3% to 2.9%
5-10 year expectations down from 2.9% to 2.8%

Consumer Sentiment Index revised up from 76.5 to 79.4 - highest level since mid-2021.
Consumer expectations revised from 74.6 to 77.4

Public confidence in Republican Party surges, while Democratic Party slightly down.

Manufacturing indices: Kansas & Chicago Fed show economy slowing

March Chicago PMI down to 41.4 from 44 previous month

Prices paid rising at slower rate
New orders, production, inventories and employment all decline

Kansas March manufacturing index down to -7 vs estimate -4 & previous -4

New orders down to -17
Prices paid up to +17 and production down to -9
Employment and average weekly hours in contraction territory

February pending home sales near record low

February pending home sales +1.6% M/M, above estimate 1.5% and Jan's -4.7%.

However, Y/Y sales down -2.16%

February total sales near 2020 record low

Crypto Market: Sam Bankman-Fried sentenced to 25 years in prison

Sam Bankman-Fried, behind the collapse of crypto exchange FTX in Nov/2022, found guilty on all 7 counts.

Judge also orders Bankman-Fried to pay $11 billion fine

US and UK scrutinize $20B crypto transferred to Russia's Garantex exchange

Earnings Update: RH

Revenue: 3029 billion USD
GAAP operating margin: 12.1%
RH repurchased 7.6 million shares, ~35% of outstanding shares, in FY22 and FY23
Expected demand growth 12-14% and revenue growth 8-10% in FY24
- Operating margin 13-14% and EBITDA margin 18-19%

Other news

Q1/2024 CFO survey shows strong improvement in revenue growth expectations for next year
- Prices are also expected to rise faster while employment growth is expected to slow

Country Garden delays release of 2023 business results report. This delay may lead to suspension of stock trading on 04/02

Video game developer Take-Two Interactive Software agrees to buy U.S. game developer Gearbox Entertainment for 460 million USD

Home Depot announces plan to acquire building materials supplier SRS Distribution in a deal worth 18.25 billion USD