It was a busy day of economic data and international news, so let’s cover the highlights. 👇
First, the U.S. economy grew at a 3.3% annualized rate during the final quarter of 2023. That blew away expectations of 2% and locked in full-year growth at 2.5%. Strength in consumer and government spending drove the gain, with inflation also progressing downward. The annual core PCE price index rose just 2.7% YoY, down from 5.9% a year ago. 👍
With the government unable to reach a consensus on future spending and the labor market continuing to soften, analysts expect spending to be less robust this year. The global geopolitical environment and the 2024 presidential election cycle in the U.S. will remain wildcards for the economy this year, but modest growth is still anticipated.
U.S. initial jobless claims ticked up by 25,000 to 214,000, marking its highest level in a month. This leading labor market data remains volatile but continues to sit near historic lows as overall labor market strength continues. 💼
Wholesale inventories rose 0.4% MoM in December, compared to a 0.4% decline in November. Retail inventories, ex-auto, behaved similarly, rising 0.6% compared to a fall of 0.6% in November. Meanwhile, the Chicago Fed National Activity Index and Kansas City Fed Manufacturing Decline remained under pressure, as business activity measures remain in negative territory.
Overseas, the European Central Bank (ECB) held rates unchanged as it monitors its policies’ impact on inflation’s downward trend. The central bank gave no indication it’s ready to start talking about rate cuts. However, like in the U.S., the market is already pricing in cuts beginning in April and a 1.5% decrease in rates for 2024. ⏸️
Meanwhile, Turkey met the market’s expectations by raising rates to 45%. The country’s Lira currency fell to a record low against the U.S. Dollar earlier this month as inflation sits near a 65% annualized rate. South Africa’s central bank kept rates unchanged as its policies continued to keep the disinflation trend going. 💱
Lastly, Chinese property stocks were bid up after the central bank took further steps to boost the liquidity available to property developers. Chinese stocks are again on a shaky footing to start the year, but some contrarian investors are looking closely at the unloved market for opportunities.
Overall, it was a positive day of economic news. And in an environment where good news is good news, stocks were able to extend their recent gains. 👍