The Weekly Market Snapshot from Frazier Allen for the week of August 28th, 2012
August 28, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The FOMC Minutes from the July 31st/August 1st policy meeting showed that Fed officials were worried about the deceleration in economic growth. “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.” However, “several members noted the benefits of accumulating further information that could help clarify the contours of the outlook for economic activity and inflation as well as the need for further policy action.”
Meeting participants discussed three policy options: extending the forward guidance (the length of time which the Fed expects to keep short-term rate exceptionally low), undertaking another round of asset purchases, and lowering the interest rate the Fed pays on excess bank reserves. Extending the forward guidance appeared to have the least amount of internal resistance, but additional asset purchases had some support. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of August 19th, 2012
August 19, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed, but generally stronger than expected. Retail sales popped 0.8% (overall and ex-autos) in July, following weak reports in April, May, and June. The CPI was flat overall in July and up only mildly ex-food & energy. However, higher prices of food and energy are expected to show through more in the report for August. Industrial production advanced, fueled by strength in autos (seasonal adjustment issues?) and hot weather (higher output of utilities).
Residential construction figures were mixed. Housing starts slipped, but single-family building permits (which are reported more accurately) rose further. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of August 12th, 2012
August 12, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Nonfarm payrolls rose more than expected in July, reducing fears that the economy may be headed back into recession. One shouldn’t put too much weight on any one particular month, especially July. However, the figures are consistent with the broad range of data suggesting moderate growth over the near term – not especially strong, but not terribly weak either.
At face value, the July payroll increase (+163,000) was consistent with the view that mild winter weather pulled forward seasonal gains that would have occurred in spring and early summer. Nonfarm payrolls averaged a 151,000 gain over the first seven months of 2012, vs. a 153,000 pace in 2011. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of July 30th, 2012
July 30, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data was mediocre, but the financial markets apparently had expected worse. Real GDP rose at a 1.5% annual rate, matching expectations. There were no surprises in the key components – consumer spending growth slowed and business fixed investment was positive but not especially strong. New home sales fell unexpectedly in June, but figures for the three previous months were revised higher.
Jobless claims dropped, but the weekly figures are unreliable in July (due to difficulties adjusting for summer plant retooling shutdowns in the auto industry) – the underlying trend remains moderate. Durable goods orders were mixed in June, with strength in aircraft and weakness in most other sectors. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of July 15th, 2012
July 15, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Recent economic data have remained consistent with a moderate pace of economic growth in the near term. Europe and the fiscal cliff remain the two key uncertainties and the major downside risks to the growth outlook. Responding to these downside risks, the Federal Reserve extended Operation Twist through the end of the year.
Officials are poised to do more, which may make QE3 a close call for the policy meeting later this month (decision due on August 1st). For further information, refer to the Monthly Economic Outlook by Raymond James Chief Economist, Scott Brown. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of July 8th, 2012
July 8, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were disappointing, but generally consistent with moderate growth in the near term. Nonfarm payrolls rose by a disappointing 80,000 in June, not far from the median forecast of +100,000. Seasonal adjustment is difficult in June, so one should take the figure with a grain of salt. However, it does raise concerns that uncertainties (the election, the fiscal cliff, Europe) may be weighing against new hiring.
There were a number of positive elements in the report. Average weekly hours advanced. Hourly and weekly earnings are now outpacing inflation, which should provide some support for consumer spending growth in the near term. Temp help employment continued to rise, suggesting that employers are still somewhat cautious, but such a rise typically presages a pickup in permanent hiring. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of July 2nd, 2012
July 2, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed, but consistent with a lackluster to moderate pace of growth in the near term. New home sales and the Pending Home Sales Index improved, consistent with a gradual housing recovery. Consumer confidence and consumer sentiment deteriorated, reflecting a worsening of attitudes for households with income over 75,000.
The Supreme Court upheld the Affordable Care Act, with Chief Justice Roberts crossing the political line. ACA would boost costs for some businesses (mid-size and large firms not currently offering healthcare coverage), but isn’t likely to slow the economy appreciably (the fiscal cliff, gasoline prices, and Europe will have substantially greater effects). The Congressional Budget Office projects that ACA will reduce the deficit, but cautions that such forecasts are imprecise. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of June 17th, 2012
June 17, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Retail sales fell 0.2% in May, matching the consensus forecast, but not quite as expected, as auto dealership sales rose 0.8% instead of falling (as the unit sales reported by the automakers did, seasonally adjusted). Ex-autos, sales fell 0.4%, pushed down partly by lower gasoline prices. Sales of building materials fell 1.7%, following a 2.3% drop in April – yet, sales of building materials for the first five months of the year were up 11.1% vs. the same period in 2011. That’s not weak.
Overall retail sales were up 7.0% y/y for the first five months of the year. Hence, this appears to be a weather story – the same story we saw in nonfarm payrolls (stronger in January and February at the expense of slower numbers in March, April, and May. Note that the folks at the Fed are smart enough to figure this out. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of June 12th, 2012
June 12, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
On Wednesday, the news from Europe was mixed. Euro area GDP figures for the first quarter were revised lower. Spain indicated that it needs help. The European Central Bank failed to cut rates (as some had hoped). However, European leaders were reported to be working up a plan on Spain and ECB President Draghi hinted at further support to come.
The Fed Beige Book noted that “overall economic activity expanded at a moderate pace” from early April to late May – an upbeat assessment relative to expectations. After the close, Fed Vice Chairman Janet Yellen said that “the economy remains vulnerable to setbacks,” adding that there is scope for the Fed to provide further monetary policy accommodation should the economy weaken or if inflation is expected to trend below the 2% target. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of June 4th, 2012
June 4, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
U.S. economic data were mixed, but mostly on the soft side of expectations. The May Employment Report disappointed. Nonfarm payrolls rose by 69,000 (vs. a median forecast of +150,000), while figures for March and April were revised a net 42,000 lower. Private-sector payrolls rose by 82,000 (+800,000 before seasonal adjustment) – a +180,000 average over the last six months and a +165,000 average over the last 12 months.
The government continued to shed jobs. The unemployment rate edged up to 8.2% (from 8.1%), due largely to a pickup in labor force participation (likely noise, although at some point, individuals will return to the labor force when they become more encouraged about job prospects). [Read more]
