Economy

Durable Goods and GDP Could Show Opposite Directional Readings

Jon C. Ogg

Published: February 24, 2016 3:22 pm

Last Updated: January 13, 2020 12:46 pm

This week is going to be an interesting week for key economic reports. We will get a fresh read on January’s Durable Goods orders, which can of course impact Gross Domestic Product readings. Then on Friday morning we get a revision to the preliminary Gross Domestic Product (GDP) for the fourth quarter of 2015.

These are directionally aligned reports in most cases, but the expectation if for these to be very different reports.

Real GDP was first reported as being 0.7% higher in the fourth quarter. The revision is expected to be lowered to a gain of only 0.4% according to Bloomberg. Another revision is expected to be in the GDP price index, but that is expected to remain flat at 0.8% growth.

Just keep in mind that the GDP report is again for the fourth quarter of 2015. That means that much of the data has now already been seen to influence the report.

For the economy to be considered strong it generally requires 3% GDP growth. Growth of anywhere close to that would like spur more fears of a Fed rate hike.

The other side of the coin is the Durable Goods expectation. That is expected to show a 2.0% gain in the new orders. Still, it may be skewed by Transportation as that reading was projected to be 0.0% on an ex-Transportation basis.

It is not widely expected that the GDP report will move the market. That is not true of Durable Goods, with the caveat that Durable Goods is an incredibly volatile report – it can be good in bad times, and it can look bad in otherwise good times.

Stary tuned.