Clarksville Weekly Market Snapshot from Frazier Allen for the week of June 22nd, 2014

Clarksville, TN – As expected, the Federal Open Market Committee left short-term interest rates unchanged, reaffirmed its forward guidance on the federal funds target rate, and trimmed another $10 billion from the monthly pace of asset purchases (to $35 billion starting in July). In the Summary of Economic Projections, Fed officials lowered their projections for 2014 GDP growth.

However, that was due entirely to the reported decline in 1Q14 GDP. Implicitly, Fed officials are expecting a 3.1% to 3.4% average pace of GDP growth in the final three quarters of 2014. The forecasts ranges for GDP growth in 2015 and 2016 were the same as the ones made in March.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of June 18th, 2014

Clarksville, TN – Developments in Iraq sent oil prices higher and undermined stock market sentiment. Note that oil price shocks are viewed as a restrain on economic growth rather than a catalyst for a higher underlying trend in inflation (as opposed to the 1970s, when they quickly fed through to wage inflation).

Iraq is one more concern to be added to the list of worries for the second half of the year. The stock market often climbs “a wall of worry,” but sometimes the wall wins.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of June 10th, 2014

Clarksville, TN – The economic data were mixed. The ISM surveys were consistent with improving activity. The trade deficit was much wider than expected in April, suggesting that next exports will restrain 2Q14 GDP growth to some extent.

The May Employment Report was “boring,” with nonfarm payroll up by 217,000 (vs. a median forecast of +215,000) and a net revision of -6,000 to March and April. The unemployment rate held steady at 6.3%. The trend in job growth has been relatively strong, but not so much that the Fed is going to take the punchbowl away anytime soon.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of June 1st, 2014

Clarksville, TN – The economic data were mixed. The estimate of real GDP growth for the first quarter was revised down to a -1.0% annual rate (vs. +0.1% in the advance estimate). Most of the revision was due to a slower pace of inventory growth, which ought to pave the way for increased production in 2Q14.

Slower inventory growth subtracted 1.6 percentage points from overall GDP growth (vs. -0.6 ppt in the advance estimate), while a wider trade deficit subtracted 1.0 percentage point (vs. -0.8 ppt in the advance estimate.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of May 25th, 2014

Clarksville, TN – Next week, the report on durable goods orders should reflect a decrease in aircraft orders and may be a little soft otherwise (possibly reflecting an impact from the late Easter holiday this year).

The estimate of GDP growth for the first quarter is likely to be revised lower, but the story shouldn’t change much (most economists are expected a strong rebound in 2Q14 GDP growth).

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of May 19th, 2014

Clarksville, TN – Concerns about the economic recovery at home and abroad helped pushed long-term interest rates lower (with the 10-year Treasury yield below 2.5%). Stocks fell broadly.

The economic data were mixed. April retail sales and industrial production disappointed, but there were upward revisions to previous figures. Building permits and housing starts jumped sharply in April, but strength was concentrated in the volatile multi-family sector.

Single-family construction activity improved only modestly. The Consumer Price Index rose in line with expectations, reflecting higher prices of food and gasoline. A jump in airline fares added to the core CPI.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of May 11th, 2014

Clarksville, TN – The economic data calendar was thin. The ISM Non-Manufacturing Index was stronger than expected, but the details of the report, including comments from supply managers, suggested that growth was not especially strong.

In her congressional testimony, Fed Chair Janet Yellen said that “although real GDP growth is currently estimated to have paused in the first quarter of this year, I see that pause as mostly reflecting transitory factors, including the effects of the unusually cold and snowy winter weather,” adding “many recent indicators suggest that a rebound in spending and production is already under way, putting the overall economy on track for solid growth in the current quarter.”

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of May 4th, 2014

Clarksville, TN – There were a lot of economic data reports this week. Most of them were consistent with weather-related restraint in 1Q14 and a rebound in activity into early 2Q14. Real GDP rose at a 0.1% annual rate in the advance estimate for 1Q14 – while weather was a factor, the GDP growth figure was also trimmed by a wider trade deficit and slower inventory growth.

Personal income and spending figures improved in March, with upward revisions to figures for February. Unit auto sales slowed a little in April, still well above the first quarter average.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of April 29th, 2014

Clarksville, TN – March home sales figures were disappointing and while the numbers are normally choppy, suggested that there may be something more to the slowdown in housing than bad weather (mortgage rates are higher than a year ago, while prices have risen significantly over the last three years).

Next week, it’s a very busy calendar, with fresh figures for April. Consumer confidence is expected to pick up. Real GDP growth is likely to be relatively soft (0.4% to +1.4%), with a weather-related restraint on consumer spending and homebuilding, drags from slower inventory growth and a wider trade deficit, and a rebound in government (following the drag from the shutdown in 4Q13).

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