Friday brought another round of decidedly mixed hard data.
Durable goods orders grew a better-than-expected 1.7 percent overall, but internal numbers were softer. Excluding transportation, the gain was just 0.4 percent, a little lower than estimates, while orders actually declined by 0.1 percent.
The importance of the numbers, particularly orders, is that it points to a softer outlook for business investment, considered a cornerstone for future growth.
Citigroup economist Andrew Hollenhorst said he remains "cautiously optimistic" on investment spending growth, even in light of the letdown from Friday's data.
"Despite the durables disappointment, we continue to think most of the weakness in Q1 GDP is transitory and will rebound in coming quarters," Hollenhorst said.
Joseph LaVorgna, the chief U.S. economist at Deutsche Bank, also sees a strong likelihood that hard data will begin to shift higher. An acceleration in capital expenditures is at the core of his forecast that full-year GDP gains will hit 3 percent, about a full percentage point ahead of Wall Street consensus.
"We are increasingly confident that the manufacturing sector is poised to contribute meaningfully to overall economic activity over the next several quarters," LaVorgna said in a note.
The first-quarter data has been the most fickle in the recovery years, typically understating full-year growth. Since 2009, the quarter has been the lowest of the year five times, and that could well be the case again this year.
There are troubling signs again in the first quarter of 2017, and if the trends in hard data don't swing, it could pose a risk to Wall Street's momentum. Peter Boockvar, chief market analyst at The Lindsey Group, posed a series of critical questions for the economy:
We certainly know the actual data in hand has lent itself to Q1 GDP growth of possibly no better than 1%. Are companies feeling better but not acting upon it just yet? Is it just the reality that we are late cycle in this recovery and we've pulled forward so much economic activity that it's just natural to slow down? Are companies worried about higher interest rates and thus reigning in some optimism because corporate debt has exploded higher over the past 7 years? With the auto sector such a huge contributor to economic growth since the recession and now signs of sales and delinquencies rolling over, is the ripple effect filtering into other areas?
His unsettling conclusion: "I would say all of the above."
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