The Independent Market Observer

Monday Update: Quiet But Positive

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on Mar 14, 2016 2:13:12 PM

and tagged In the News

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monday updateThere were no major economic data releases last week but a number of minor ones. News was generally positive, despite some weak spots.

Last week's news

From a global perspective, two items stood out:

  • First, capital outflows from China, a major worry in recent months, eased considerably, suggesting that the government is getting a handle on the problem.
  • Second, the European Central Bank moved to stimulate the eurozone economy, announcing a significant cut in interest rates (to an even more negative level) and a significant expansion (by a third) of its bond purchase program. Market reactions were mixed but generally positive.

Here in the U.S.:

  • Consumer comfort increased slightly, with the Bloomberg survey up from 43.6 to 43.8.
  • A positive swing in mortgage applications, from −4.8 to 0.2, also suggested improving consumer sentiment.
  • The initial jobless claims figure dropped from 278,000 to 259,000, a very low level that speaks to continued strength in the employment market.

More worrying was a decline in the growth of consumer borrowing and a drop in the NFIB Index of Small Business Optimism, from 93.9 to 92.9. Although it remains at positive levels, the index has been moving in the wrong direction.

A look at the week ahead

This week, we will get substantially more information on consumers, housing, and industry.

On Tuesday, the retail sales report is expected to show a small decrease in the headline number, thanks to a further decline in gasoline prices. Control group sales, which exclude autos, gas, and building materials, are expected to increase by 0.3 percent, building on the strong 0.6-percent gain in January.

On Wednesday, the National Association of Home Builders will release its industry sentiment survey, which is expected to tick up slightly from 58 to 59, remaining at very healthy levels. The housing starts figure is expected to increase as well, more than reversing the previous month’s decline, with the possibility of an upside surprise based on permit data.  

Consumer prices are expected to decline month-to-month, again due to declines in gasoline prices, as well as in food and other commodities. Core prices, which exclude food and energy, are expected to increase slightly less than they did the previous month. Year-on-year inflation is also expected to drop for the headline number but increase for core.

Analysts anticipate that industrial production will disappoint, with positive growth dropping back to negative levels, as gains in utility production declined on better weather and the drop in oil prices further depressed drilling and energy-production activity. Looking at manufacturing alone, activity is expected to remain flat, although there are downside risks based on the hours worked in the sector.

Finally, on Friday, we will see the University of Michigan Consumer Confidence result. Expectations are for a small increase, from 91.7 to 92.2, given the rebound in the stock market and strong jobs data. There is some downside risk here, though, as gas prices increased toward the end of the month.

Have a great week!

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