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50% CHANCE OF RAIN: GDP, PCE, JOBLESS CLAIMS, DURABLE GOODS, NEW HOME SALES

The data dam burst on Thursday, inundating investors with mostly damp economic indicators.

The U.S. economy grew by 1.6% at a quarterly annualized rate in the first three months of 2026, weaker than the initially reported 2.0% advance take and marking a weaker-than-expected rebound from the fourth quarter's meager 0.5% growth rate.

Below the surface, the Commerce Department's second stab at first-quarter GDP USGDPA=ECI shows international trade was a net detractor, dampening the topline by 1.3 percentage points. While private investment added 1.1 pps to the total, weaker than the 1.5 pps originally reported, construction of residential and non-residential structures both detracted about 0.2 pps.

Investment in information processing equipment contributed 0.9 pps to the topline, pointing toward ongoing AI-related expenditures.

Consumer spending, which accounts for about 70% of the U.S. economy, was revised lower, but contributed 1.0 pps to the headline. The lion's share of consumer spending went toward services.

"This leaves the economy’s underlying momentum looking even weaker, with consumption growing at a mediocre pace despite a fleeting boost towards the end of the quarter from the surge in tax refunds, and fixed investment outside of the tech sector still falling outright," says Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. "We expect a similar picture in Q2."

The Commerce Department also released its March Personal Consumption Expenditures (PCE) report USPCE=ECI.

Starting with the PCE price index, the Fed's preferred inflation yardstick, headline and core prices (which exclude food and energy items) decelerated on a monthly basis, rising by 0.4% and 0.2%, respectively. Both were cooler than economists anticipated.

Year-over-year, headline inflation heated up to 3.8% and core prices increased by 3.3%, both readings in line with expectations.

"The Federal Reserve is back under 'inflation siege' as its preferred price gauge surges to the highest level in nearly a year, dealing a major blow to market expectations for imminent interest rate cuts," says Nigel Green, CEO of deVere Group. "The inflation rebound leaves the Federal Reserve facing a brutal policy reality."

Elsewhere in the report, personal income disappointed by remaining unchanged in defiance of the 0.4% increase analysts expected.

Personal consumption, however, grew by 0.5%, in line with economists' projections but half the growth rate of the previous month's 1.0% increase.

With spending growing and incomes stagnant, the saving rate - or the unspent portion of disposable income - dropped from 3.2% to 2.6%, its lowest level since June 2022.

Turning to the labor market - the other half of Warsh & Co.'s dual mandate - last week, 215,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI, a weekly increase of 5,000 and overshooting expectations by 4,000.

Ironing out weekly volatility, the four-week moving average of initial claims remains range-bound but now has a clear upward bias.

Ongoing jobless claims USJOBN=ECI, which are reported on a one-week lag, inched 0.8% higher to 1.786 million, just north of consensus.

New orders for long-lasting U.S.-manufactured goods USGDN=ECI rose by 7.9% in April, blasting past the expected 3.5% increase and marking a sharp acceleration from the previous month's 1.3% growth.

As is often the case, airplanes provided the boost.

Diving below the surface of the Commerce Department's report - which covers everything from waffle irons to attack drones - a 165.9% jump in orders for commercial aircraft provided the lift; excluding transportation-related goods, new orders rose by a less-impressive 1.1%.

Motor vehicles/parts rose 0.4%, while computers and electronics decreased by 0.7%.

But new orders for core capital goods - which exclude aircraft and defense items and are considered a barometer of U.S. corporate capex plans - unexpectedly dropped by 1.1%, in defiance of the 0.4% estimate.

"Underlying capital goods orders took a step back after two consecutive months of strong gains," writes Matthew Martin, senior U.S. economist at Oxford Economics. "But shipments in the same category continued to rise in April and suggest business equipment investment will remain strong in Q2."

Finally, the sales of freshly constructed single-family U.S. homes UHNS=ECI unexpectedly dropped by 6.2% in April to 622,000 units at a seasonally adjusted annual rate (SAAR), according to the Commerce Department.

This follows the prior month's downwardly revised 3.4% gain, while falling 6.5% short of the 665,000 units SAAR consensus.

At April's rate of new home sales, it would take 9.4 months to sell every unit on the market, up from 8.7 months in March.

(Stephen Culp)

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