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

Clarksville, TN – Stock market participants seemed only mildly concerned about escalating tensions in Ukraine, but were encouraged by comments from Fed Chair Janet Yellen. Yellen suggest that the Fed would respond to significant, surprising changes in the outlook for growth, inflation expectations, or financial conditions.

Short-term interest rates aren’t going to be raised for a while, but the first increase in rates could be pushed out if the Fed remains short of its goals (full employment, 2% inflation).

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of April 13th, 2014

Clarksville, TN – The economic calendar was relatively thin. The Producer Price Index rose more than expected in March, reflecting a pickup in services (which had fallen in February). Details continue to suggest limited inflation pressure in the pipeline.

The Job Openings and Labor Turnover Survey data continued to suggest a large amount of slack in the job market (hiring rates and quit rates are trending flat, still low by historical standards). The IMF slightly lowered its forecast for global growth this year and next, with larger downward shifts in the outlook for Russia and Brazil.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of April 6th, 2014

Clarksville, TN – The data remained consistent with a continued economic recovery. However, it’s unclear how much of the improvement is simply a rebound from bad weather and how much is underlying strength.

The monthly ISM surveys were mixed. Motor vehicle sales rebounded sharply in March (suggesting that bad weather postponed sales, just as we saw with the government shutdown in October). The March Employment Report was close to expectations.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of April 3rd, 2014

Clarksville, TN – The economic data reports were mixed and mostly ignored by the financial markets. Real GDP rose at a 2.6% annual rate in the 3rd estimate for 4Q13 (vs. +2.4% in the second estimate and +3.2% in the advance estimate).

Most of the story remained that same. Government subtracted a full percentage point from overall growth, but that was offset by a narrower trade deficit (which added a percentage point).

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of March 24th, 2014

Clarksville, TN – Financial market participants seemed to care little about Putin’s annexation of Crimea, but freaked out following a Yellen comment taken out of context. An upside surprise in the Philadelphia Fed Index help restore positive sentiment in equities.

As was widely expected, the Federal Open Market Committee tapered the monthly pace of asset purchases by another $10 billion (to $55 billion beginning in April).

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of March 16th, 2014

Clarksville, TN – Next week, the focus will be on the Fed’s policy decision and Janet Yellen’s first press briefing as Fed chair. The Federal Open Market Committee is expected to taper the monthly pace of asset purchases by another $10 billion (to $55 billion).

Policymakers are also expected to tweak the language of the forward guidance (the Fed’s conditional commitment to keep the overnight lending rate exceptionally low). Specifically, we can expect the FOMC to discard the 6.5% unemployment rate threshold.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of March 9th, 2014

Clarksville, TN – There was plenty of fresh economic data, but most of it was distorted by the weather (which can have different effects depending on which areas of the country get hit).

Nonfarm payrolls rose by 175,000 in the initial estimate for February (median forecast: +150,000, although market participants were likely braced for about +130,000). Figures for December and January were revised a net 25,000 higher.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of February 16th, 2014

Clarksville, TN – In her first monetary policy testimony to Congress, Fed Chair Janet Yellen appeared calm, confident, and in charge.

She pledged continuity in monetary policy and regulatory reform. While “not on a preset path,” the monthly pace of asset purchases will likely be reduced “in further measured steps at future meetings” (which is widely interpreted as -$10 billion per Fed policy meeting).

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