{"id":944,"date":"2013-01-25T10:21:25","date_gmt":"2013-01-25T16:21:25","guid":{"rendered":"http:\/\/www.sunlakesofarizona.com\/blog\/?p=944"},"modified":"2013-01-25T10:21:25","modified_gmt":"2013-01-25T16:21:25","slug":"economic-notes-for-the-week-of-january-21st","status":"publish","type":"post","link":"https:\/\/dev.sunlakesofarizona.com\/blog\/2013\/01\/economic-notes-for-the-week-of-january-21st\/","title":{"rendered":"Economic Notes for the Week of January 21st"},"content":{"rendered":"

(+)\u00a0Housing starts<\/strong>\u00a0for December were dramatically higher, with a gain of +12.1% relative to an expected +3.3% improvement.\u00a0 By way of differentiation, single-family starts were up +8.1% while\u00a0mufti\u00a0family continued its trend higher, growing over +20%, and the growth was seen in all areas of the country.\u00a0 December\u00a0building permits<\/strong>, on the other hand, were \u2018disappointing\u2019 to the extent that the gain was +0.3% lagged the consensus +0.5% figure.\u00a0 These were led by gains in single-family permits, as opposed to multi-family.<\/p>\n

(+) Retail sales<\/strong> numbers were better than anticipated, with a gain of +0.5% for December versus an expected +0.2% result.\u00a0 As usual, the embedded sub-categories added more color, but\u00a0didn’t\u00a0change the result much.\u00a0 The sales \u2018ex-autos\u2019 figure was a similar +0.3%, a shade above expected, while the \u2018core\/control\u2019 group that excludes volatile autos, gasoline and building materials gained +0.6%\u2014double what was expected (partially due to a gasoline price drop).\u00a0 What we can take from all this is that more substantive elements like health and personal care components performed well, when all cyclical components removed.<\/p>\n

(-) Business inventories<\/strong> rose a bit for November, but largely in line with expectations, at +0.3%.\u00a0 This was a slower rate of accumulation than in the prior quarter, so a small negative in terms of overall growth measurement prospects.<\/p>\n

(+) On the inflation front, the consumer price index<\/strong> for December came in flat, in keeping with the expected reading.\u00a0 The core CPI figure, which excludes more volatile food and energy prices, rose +0.1% compared to an expected +0.2% increase.\u00a0 Owner\u2019s equivalent rent rose by +0.1%, which was less than trend, and medical expenditures fell by about half a percent, as did used cars.\u00a0 Year-over-year, the headline and core inflation measures rose +1.7% and +1.9%, respectively.\u00a0 Interestingly, the producer price index<\/strong> figures moved in the opposite direction from the CPI to some extent.\u00a0 The December headline number fell -0.2% relative to an expected -0.1% result, while the core number rose +0.1%\u2014a fraction of the expected +0.2%\u2014the difference in the two consistent with lower gas and food prices over the month.\u00a0 Both finished goods and intermediate good prices rose a tenth to a few tenths of a percent, which is quite minimal.<\/p>\n

Overall, inflation remains contained on both a core basis as well as from the more volatile food and energy areas as of late, and is trending well below the Federal Reserve\u2019s target limit of 2.5%.\u00a0 As economic growth continues to be slow and choppy, low inflation is not surprising and may well continue absent any geopolitical shocks or positive growth surprises.<\/p>\n

(0) Manufacturing industrial production<\/strong> rose in December by +0.3%, in line with forecast.\u00a0 Results were led by strong gains in motor vehicle and parts production, as well as computer\/electronics output.\u00a0 Utilities output fell, perhaps as a result of warmer-than-average winter weather.\u00a0 Capacity utilization<\/strong> for December was 78.8%, which was a bit higher than the expected 78.5%.<\/p>\n

(-) In looking at several heavily-reviewed regional Fed indexes for January, the Philadelphia Fed index<\/strong> declined to -5.8, which was in stark contrast to the expected +5.6.\u00a0 The details of the report reflected this, including a deterioration in new orders, shipments and employment, as well as capital expenditures.\u00a0 Similarly, the New York Empire manufacturing index<\/strong> was weaker than expected, with a -7.8 reading relative to an expected flat result.\u00a0 As with the Philly report, many of the same underlying components were weak.<\/p>\n

(0) The regional surveys were in line with a lackluster Fed Beige Book<\/strong> for January, which depicted a scenario of positive, but relatively tame economic activity across the nation.\u00a0 All twelve districts experienced \u2018modest\u2019 to \u2018moderate\u2019 growth with is in keeping with expectations and the recent trend of a \u2018muddle through\u2019 environment.\u00a0 Manufacturing comments were mixed, with roughly half of the districts reporting expansion, with a few noting shrinking activity.\u00a0 Anecdotal comments also mentioned concerns about budget cuts related to the government fiscal sequestration\u2014particularly in areas of potential cutback, such as defense.\u00a0 Housing, however, was a plus in the report in all areas\u2014consistent with housing data reported elsewhere.<\/p>\n

 <\/p>\n

(0) The NAHB homebuilder index<\/strong> for January posted an unchanged 47 reading (just a shade below the consensus of 48).\u00a0 This index has performed strongly during the past year, which points to potential for strong building activity looking forward.<\/p>\n

(-) The preliminary University of Michigan survey of consumer sentiment<\/strong> fell again in January to 71.3, which was below the expected 75.0 reading.\u00a0 Consumer assessments of both current and future conditions deteriorated this month, and continues the trend of poor sentiment perhaps related to political wranglings in Washington.\u00a0 Interestingly, lower- to middle-income respondents were generally the most negative (perhaps related to the payroll cut expiration at year-end).\u00a0 Inflation expectations rose a bit to 3.4% for the year ahead, while longer-term estimates remained a shade below the long-term average of 3.0%.<\/p>\n

(0) Initial jobless claims<\/strong> came in at much lower 335k, versus the expected 369k forecast for the Jan. 12 ending week and ended up being the lowest reading since January of 2008.\u00a0 However, being only one week, we will wait to see if a trend develops.\u00a0 Continuing claims<\/strong> for the Jan. 5 week came in at 3,214k, which was a bit higher than the 3,155k expected.<\/p>\n

Market Notes <\/em><\/strong><\/p>\n\n\n\n\n\n\n\n\n\n
\n

Period ending 1\/18\/2013<\/strong><\/td>\n

\n

1 Week (%)<\/strong><\/p>\n<\/td>\n

\n

YTD (%)<\/strong><\/p>\n<\/td>\n<\/tr>\n

DJIA<\/td>\n\n

1.23<\/p>\n<\/td>\n

\n

4.28<\/p>\n<\/td>\n<\/tr>\n

S&P 500<\/td>\n\n

0.96<\/p>\n<\/td>\n

\n

4.28<\/p>\n<\/td>\n<\/tr>\n

Russell 2000<\/td>\n\n

1.37<\/p>\n<\/td>\n

\n

5.14<\/p>\n<\/td>\n<\/tr>\n

MSCI-EAFE<\/td>\n\n

-0.06<\/p>\n<\/td>\n

\n

3.19<\/p>\n<\/td>\n<\/tr>\n

MSCI-EM<\/td>\n\n

0.72<\/p>\n<\/td>\n

\n

2.42<\/p>\n<\/td>\n<\/tr>\n

BarCap U.S. Aggregate<\/td>\n\n

0.04<\/p>\n<\/td>\n

\n

-0.23<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n\n\n\n
U.S. Treasury Yields<\/strong><\/td>\n\n

3 Mo.<\/strong><\/p>\n<\/td>\n

\n

2 Yr.<\/strong><\/p>\n<\/td>\n

\n

5 Yr.<\/strong><\/p>\n<\/td>\n

\n

10 Yr.<\/strong><\/p>\n<\/td>\n

\n

30 Yr.<\/strong><\/p>\n<\/td>\n<\/tr>\n

12\/31\/2012<\/td>\n\n

0.05<\/p>\n<\/td>\n

\n

0.25<\/p>\n<\/td>\n

\n

0.72<\/p>\n<\/td>\n

\n

1.78<\/p>\n<\/td>\n

\n

2.95<\/p>\n<\/td>\n<\/tr>\n

1\/11\/2013<\/td>\n\n

0.07<\/p>\n<\/td>\n

\n

0.26<\/p>\n<\/td>\n

\n

0.78<\/p>\n<\/td>\n

\n

1.89<\/p>\n<\/td>\n

\n

3.05<\/p>\n<\/td>\n<\/tr>\n

1\/18\/2013<\/td>\n\n

0.08<\/p>\n<\/td>\n

\n

0.26<\/p>\n<\/td>\n

\n

0.77<\/p>\n<\/td>\n

\n

1.87<\/p>\n<\/td>\n

\n

3.03<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

U.S. large cap stocks were up again this week to five-year highs, giving 2013 a strong start.\u00a0 While we realize a lot of unique factors can play out in a given year, a strong start has resulted in an approximate 85% success rate in whether or not the year as a whole ends up with a positive return.\u00a0 (Past performance is no guarantee of future results, naturally.)<\/p>\n

U.S. earnings season is in full swing, and were led last week by strong results from several financial institutions, such as Goldman Sachs, Morgan Stanley and JPMorgan Chase as well as economically-sensitive firms like General Electric.\u00a0 From a sector standpoint, energy and industrials led the way, while technology and telecom lagged the market.\u00a0 This far, 65% of firms have reported earnings above estimates, and 69% have registered above-estimate revenues (better than averages over the past four quarters).\u00a0 Earnings growth rates from Q3-2012 were slightly negative, but have come in at nearly +2% so far this quarter.\u00a0 This coming week will be a big one from an earnings release standpoint, with 11 Dow and 80 S&P firms reporting in.<\/p>\n

In foreign stocks, emerging market names outperformed developed countries.\u00a0 Specifically, India, Russia and China closed the week strongest\u2014with economic data showing better signs of a potential growth turnaround in these areas.\u00a0 By contrast, Japan and a few peripheral Asian nations lost ground.<\/p>\n

Bonds gained slightly, with the yield curve largely unchanged.\u00a0 While absolute returns were fairly tempered, areas like emerging market debt and U.S. high yield outgained the broader index.<\/p>\n

Real estate securities were led by strong weeks in U.S. industrial and mortgage, while European and Asian REITs lagged.<\/p>\n

Commodities were generally higher, with strong bouncebacks from energy and grains (wheat specifically), while industrial metals showed weakness.\u00a0 Volatile natural gas was up 7% on the week, with silver reversing weakness from last month.\u00a0 For the year so far, commodities have performed well with improved expectations for global growth.<\/p>\n

Have a good week.<\/p>\n

Karl Schroeder, RFC<\/p>\n

Investment Advisor Representative<\/p>\n

Schroeder Financial Services, Inc.<\/p>\n

480-895-0611<\/p>\n

Sources:\u00a0 FocusPoint Solutions, Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Goldman Sachs, JPMorgan Asset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Thomson Reuters, Schroder\u2019s, Standard & Poor\u2019s, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.\u00a0 Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return\/excluding dividends.\u00a0 Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.<\/p>\n

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.\u00a0 All information and opinions expressed are subject to change without notice.\u00a0 Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.\u00a0 Schroeder Financial Services, Inc. is a registered investment advisor.<\/p>\n

Notes key:\u00a0 (+) positive\/encouraging development, (0) neutral\/inconclusive\/no net effect, (-) negative\/discouraging development.<\/p>\n","protected":false},"excerpt":{"rendered":"

(+)\u00a0Housing starts\u00a0for December were dramatically higher, with a gain of +12.1% relative to an expected +3.3% improvement.\u00a0 By way of differentiation, single-family starts were up +8.1% while\u00a0mufti\u00a0family continued its trend higher, growing over +20%, and the growth was seen in all areas of the country.\u00a0 December\u00a0building permits, on the other hand, were \u2018disappointing\u2019 to theRead more<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"class_list":["post-944","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/944","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/comments?post=944"}],"version-history":[{"count":1,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/944\/revisions"}],"predecessor-version":[{"id":945,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/944\/revisions\/945"}],"wp:attachment":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/media?parent=944"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/categories?post=944"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/tags?post=944"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}