Economic Update

April 10th, 2014

Economic Update

National:

Fed Shows Worry About Inflation. Fed officials are growing concerned the U.S. inflation rate won’t budge from low levels, the latest sign of angst among central bankers regarding the global economy.

Economists See Growth Spurt Delayed, Not Derailed. Harsh winter weather delayed—but likely didn’t derail—the breakout growth many economists expected for the U.S. going into the year, according to The Wall Street Journal’s monthly survey.

Jobless Claims Hit 7-Year Low. The number of Americans filing new claims for unemployment benefits fell last week to its lowest level in seven years, a sign the labor market is rebounding sharply from a winter-related soft spell.

www.wsj.com

International:

Back in the real world of the debilitated Greek economy, the country remains mired in deflation. CPI fell 1.3% on year in March after dropping 1.1% in February, with consensus -1.1%. Unemployment declined to 26.7% in January from 27.2% in December.

Chinese exports tumbled 6.6% on year in March, which represented an improvement from an 18.1% plunge in February, although consensus was for growth of 4%. Imports slumped a worse-than-expected 11.3%, while the trade balance swung to a surplus of $7.71B from a deficit of $22.98B. Economist Hu Yifan says that “investors don’t have to be worried,” about the numbers, as the export declines were partly due to artificially high data a year earlier and the severe winter in the U.S.

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April 3rd, 2014

Economic Update

National:

U.S. Trade Gap Widens, Spurring Downshift in GDP Projections. American exports fell 1.1% in February, a sign that weak overseas economies could be restraining U.S. growth in the first few months of the year (www.wsj.com).

The House has passed a bill authorizing fairly limited sanctions against Russian and Ukrainian officials involved in corruption and violence, extending $1B in loan guarantees to Ukraine, and providing $150M in direct assistance to the country. With the Senate having approved similar legislation last week, the measure is due to go to President Obama for his signature.

The government has met its goal for signing up 7M people for Obamacare by the end of March, with at least 7.1M enrolling despite the technical chaos that has hit the healthcare online exchanges. However, insurers fear that they will have to sharply raise premiums for 2015 and beyond, as they haven’t signed up enough young and healthy people who are less likely to need care.

International:

The eurozone’s business sector continued to enjoy broad, albeit softening, growth in March, with the composite PMI edging down to 53.1 from 53.3 in February. Services PMI slipped to 52.2 from 52.6. Irish composite PMI hit a seven-year high and France a 31-month peak, but German growth softened. Still, the eurozone business sector enjoyed its best quarter for three years in Q1, and the surveys indicate GDP growth of 0.5%.

China has unveiled another mini-stimulus package as part of an attempt to stabilize slowing growth and maintain confidence. The announcement comes even as the government looks to reform the economy so that it relies less on the state sector. The program includes selling 150B yuan ($24.6B) in bonds for railway construction, improved housing for the low paid, and tax relief for struggling small companies.

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March 27th, 2014

Economic Update

National:

U.S. Growth Ended 2013 on Solid Footing. Consumer spending picked up late last year more than previously estimated, putting the economy on stronger footing ahead of the recent disruptions caused by harsh weather.

Fed Rejects Citigroup’s Dividend Plan. Citigroup Inc. failed to get Federal Reserve approval to reward investors with higher dividends and stock buybacks, a surprising blow to Chief Executive Michael Corbat’s effort to bolster the bank’s reputation following a 2008 government rescue.

Pending Home Sales Fall Unexpectedly. The number of people signing contracts to buy previously owned homes unexpectedly declined in February, a sign the sector continued to struggle through unusually cold weather and rising mortgage rates.

International:

Bad News Piles Up for China’s Economy. Signs of economic stress are mounting as Chinese companies report disappointing profits and state-owned banks take large debt write-offs.

Europe Is Urged to Rethink Shale. The crisis in Ukraine has intensified calls—including from senior U.S. officials—for Europe to develop its own shale industry to help wean the Continent off Russian gas.

 

www.wsj.com

 

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March 20th, 2014

Economic Update

National:

Yellen Debut Rattles Markets. Investors bristled after Janet Yellen emerged from her first meeting as Federal Reserve chairwoman with some unsettling signals about the central bank’s outlook for short-term interest rates.

Housing Recovery Hits Hurdles. Existing-home sales fell again in February, the latest sign of severe weather and worsening affordability undermining the housing recovery.

U.S. Jobless Claims Tick Up But Stay Near Recent Low. The number of people filing for first-time jobless benefits rose slightly last week but remained near a three-month low, suggesting a steady labor market.

International:

France Brings Down Euro-Zone Business Activity. Business activity in the 18 nations that use the euro lost some momentum in February, dragged down by weakness in the bloc’s second-largest economy, France.

Bank of England Shakes Up Top Team. The U.K. treasury made three appointments to the Bank of England’s top team and shuffled seats on its two policy committees as part of an unprecedented overhaul of the 320-year-old central bank to be unveiled later by Gov. Mark Carney

Compelling Signs the Chinese Property Boom Is Over. China’s World: China “bears” have for years been predicting a residential real-estate crash. The most important driver of the economy isn’t there yet, but there are plenty of signs that it is winding down.

www.wsj.com

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March 13th, 2014

Economic Update

National:

Dow Drops About 200 Points. The slide in U.S. stocks deepened on Thursday afternoon, putting the Dow on track for a fourth decline in a row, as investors grew cautious over soft economic data from China and rising tensions in Ukraine

Business Groups Size Up Obama’s Overtime Plan. President Obama’s plan to propose new overtime protections for millions of workers prompted a debate about whether the effort would benefit low-wage and middle-class workers.

Fewer Confident Enough to Quit in Chilly Winter Job Market. The latest data on U.S. workers’ willingness to change jobs adds to evidence the job market slowed this winter — and just not because of the weather.

www.wsj.com

International:

China has released more data indicating that its economy is slowing, with industrial production growth slowing to 8.6% on year in January and February from 9.7% previously and missing consensus of 9.5%. Retail sales softened to +11.8% from +13.6%, while urban fixed-asset investment also weakened. The disappointing readings follow data which showed that exports plunged in February.

Test Case for World’s Central Bankers. Bank of England chief Mark Carney has seen a revival of the U.K. economy, but like U.S. Fed leaders, must decide when and how to increase interest rates.

www.wsj.com

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March 6th, 2014

Economic Update

National:

Obama details budget plan; debt payments seen tripling. President Obama yesterday unveiled his $3.9T budget for fiscal-year 2015, confirming proposals that had already been flagged in advance. These include tax hikes for the rich and energy companies, and increased spending on infrastructure and education. As expected, Republicans weren’t too impressed with the plans. Perhaps more interestingly, the government expects debt interest payments to more than triple over the next decade to $886B, due to higher interest rates and increasing debt.

U.S. Household Net Worth Hits Record. Americans’ wealth reached an inflation-adjusted record last year—$80.7 trillion—thanks to a surging stock market and rising home values, laying the groundwork for stronger economic growth (www.wsj.com)

Nonmanufacturing PMI Falls. The U.S. nonmanufacturing sector saw sharply slower activity last month as a barometer of purchasing managers’ views fell to its lowest level in four years. (www.wsj.com)

Factories Bounce Back in February. U.S. manufacturers rebounded in February despite the continuing harsh winter, reflecting confidence about growth prospects at home and overseas. (www.wsj.com)

International:

Eurozone business activity better than initially estimated. Eurozone services PMI increased to 52.6 (flash 51.7) in February from 51.6 in January, while composite output rose to 53.3 (flash 52.7) from 52.9. The data suggests that eurozone GDP is on track to grow 0.4-0.5% in Q1, says Markit, which would be the “best performance for three years.” Meanwhile, retail sales blew past expectations with a rise of 1.6% on month in January – the largest increase since November 2001 – after falling 1.3% in December.

China: Where 7.5% can be 7.2% or 7.3%. China’s Finance Minister Lou Jiwei has indicated that the country’s 2014 GDP growth goal of 7.5% is not a cast iron target, saying that 7.2% or 7.3% would also “count.” What’s more important is employment, Lou said – the government aims to create 11M jobs this year. “This flexibility allows them to flag an encouraging number to the business community but at the same time to feel free not to react with stimulus and more debt if it’s missed a bit,” says Credit Agricole economist Dariusz Kowalczyk.

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February 27th, 2014

Economic Update

National:

Housing recovery to be uneven – study. The housing market will probably rebound over a five-year period, a new study predicts, but the recovery will be uneven. The report, which was compiled by the Demand Institute think-tank, projected that in 50 large metropolitan areas, prices will rise in the top five regions by an average of 32% from 2012-2018 but only by 11% in the bottom five.

Taper Will Continue if Growth, Job Gains Persist, Says Fed’s Pianalto. The departing head of the Federal Reserve Bank of Cleveland said Wednesday the central bank will press forward with cutting back on its bond-buying stimulus as long as the economy performs as expected (www.wsj.com).

International:

Japan to bring back nuclear power as major energy source. Despite widespread opposition, Japan intends to revive nuclear energy as a major source of electricity, the government disclosed today in a draft document about its long-term energy strategy. Japan’s nuclear plants were idled following the Fukushima disaster almost three years ago, which has caused the country to significantly increase its energy imports. That, in turn, has acted as a drag on GDP.

German jobless rate unchanged in February. Germany’s seasonally adjusted unemployment rate has held steady at 6.8% in February, as expected. The number of people out of work fell by 24,000 to 2.914M, the lowest since September 2012. “For 2014, a tightening German labor market raises our expectations that wages are also going to increase, which should feed through to higher consumption,” says Christian Schulz at Berenberg Bank. “(That) should allow Germany to rely on domestic demand for growth in 2014 as exports may face some pressure due to the emerging-market crisis.”

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February 20th, 2014

Economic Update

National:

Fed Puts Rate Increase on the Radar. Conversation at the Federal Reserve’s most recent policy meeting turned to something that hasn’t been a serious topic for years: the possibility of interest-rate increases in the near future.

Consumer Prices Edge Up, Aided by Rise in Energy Costs. Consumer prices held nearly flat last month, reflecting tepid overall inflation across the economy as the Federal Reserve rolls back one of its key easy-money policies.

Amid Cold, Builders Started on Fewer New Homes in January. Construction of new homes tumbled in January, the latest sign of cooling in the U.S. housing market as much of the country shivered through a cold and snowy winter.

www.wsj.com

International:

Eurozone business activity softens. Eurozone flash manufacturing PMI has slipped to 53 in February from 54 in January and undershot forecasts that were also 54. German growth slowed and France’s contraction accelerated. The eurozone’s services print has edged up, but the composite output has fallen to 52.7 from 52.9. “A dip in the eurozone PMI provides a reminder that the region’s recovery continues to be uneven and fragile,” says Markit, “but it’s too early to read too much into one month’s data.”

Japanese trade deficit soars to record, shares slump. Japan’s trade deficit more than doubled to a record ¥2.79T ($27.3B) in January from ¥1.3T in December and exceeded consensus of ¥2.49T. Export growth slowed while imports soared 25%. In Q4, a large trade deficit contributed to GDP expanding at a lower-than-expected 1%. However, the latest figures may have been affected by a rush to purchase foreign-made goods before a sales-tax increase in April and by the Chinese New Year.

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February 13th, 2014

Economic Update

National:

Fed’s Yellen Sets Course for Steady Bond-Buy Cuts. The U.S. economic outlook would have to take a distinctive turn for the worse before the Federal Reserve considers halting its reduction of bond purchases, Yellen said.

Obama set to sign debt-ceiling measure after Senate approval. As with the House on Tuesday, the Senate yesterday approved an extension to the government’s borrowing authority until March 16, 2015, although not without much handwringing from Republicans. The legislation is now due to be sent to President Obama for his signature.

Small firms to get another year’s relief from Obamacare. The government has announced yet another delay to a crucial part of Obamacare, saying that businesses with 50-99 full-time workers won’t have to provide health insurance to their workers until 2016. Larger firms will have to cover at least 70% of employees by 2015 and 95% a year later. The original plan was for companies to offer coverage this year, but in July, that was delayed until 2015.

 

International:

German Growth Forecast Raised. Germany’s economics ministry slightly increased its 2014 economic growth forecast to 1.8% from an earlier estimate of 1.7%, citing strong domestic demand. (www.wsj.com)

Chinese exports blow past forecasts but raise doubts. China’s exports accelerated to +10.6% on year in January and slayed consensus for a rise of just 2%, while imports increased 10% vs +3%. However, analysts are skeptical: they had expected that the long Lunar New Year holiday would drag on trade last month, whilst other economic data has been disappointing. The concern is that, as in the past, the trade figures could have been boosted by fake transactions as people looked to secretly bring money into China.

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February 6th, 2014

Economic Update

National:

Morning MoneyBeat: Don’t Forget About the Debt Ceiling. Lost in the emerging-market turmoil and the jittery U.S. stock markets is the fact that a fresh battle over the debt ceiling is brewing in the nation’s capital. Washington has not been a front-and-center issue for investors since last year’s government shutdown was resolved. But with the government expected to bump up against the borrowing limit on Friday, opinions are split on how this will play out and what the economic and market consequences will be.(www.wsj.com)

Obamacare to cause major reduction in hours worked – CBO. Obamacare could lead to a fall in the number of hours worked by the equivalent of 2M full-time jobs by 2017, the Congressional Budget Office has forecast. The healthcare law could prompt some people, especially those on lower salaries, to restrict the amount of time they work so that they will still be eligible for health subsidies.

Mortgage Rates Hit Lowest Level in 3 Months. Average mortgage rates fell to the lowest level since mid-November last week as unease over economic growth in the U.S. and market turmoil abroad prompted investors to load up on government bonds. (www.wsj.com)

International:

Eurozone business activity strengthens again, Spain charges higher. Eurozone composite PMI rose to 52.9 in January from 52.1 in December as the services print edged up to 51.6 from 51. Of particular note, Spain’s composite PMI hit a 6 1/2 year peak of 54.8. “Spain and Ireland are now seeing robust growth, undergoing their strongest phases of expansion since 2007, while Italy is also returning to growth and France’s business sector is also showing signs of stabilizing,” Markit says.

Asian, EU stocks mostly up, U.S. futures slip. Asian and European shares have mostly risen as markets enjoy a break from a global sell-off that has been going on for about two weeks. The Nikkei increased following strong earnings reports, while encouraging PMI data has helped keep much of Europe higher. However, there are doubts about the sustainability of today’s gains. “Opinions remain divided on whether this week’s rally is anything more than a ‘dead cat bounce’,” say analysts at BNP Paribas. Perhaps reflecting those doubts, U.S. stock futures were lower premarket.

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