October’s CPI Research Notes

by Jim Baird on November 20, 2014

CaptureCPI unchanged at 1.7% for the third consecutive month

Headline inflation was unchanged at 1.7% for the third consecutive month in October.  Prices were flat for the month and haven’t moved meaningfully since July, after surging in the late spring and early summer. Core inflation, which eliminates the impact of volatile food and energy prices, increased by 0.2%, pushing the year-over-year change in core CPI marginally higher to 1.8%   The month-on-month change for both headline and core CPI were slightly greater than expected for the month; surveys had suggested a 0.1% decline for the headline index, and an increase of just 0.1% for the core reading.

Though prices surged in the first half of the year, disinflationary pressures have re-emerged on the back of sharp decline in commodity prices, most notably oil.  A combination of ample supply and slower growth in global demand has pushed energy costs lower in recent months.  That reduction in cost has been a boon to U.S. households, providing a bit more flexibility in budgets and capacity for discretionary spending.  Whether or not that translates to a stronger sales results for retailers in the rapidly approaching holiday shopping season remains to be seen.

We are now over five years into the current expansion.  Labor market conditions continue to improve on the back of solid job creation.  While conditions are not yet tight enough nationally to act as a catalyst for a meaningful pickup in wage growth, some pockets have emerged in certain regions and sectors.  Numerous indicators seem to point to the potential for wage growth to accelerate in the coming quarters.

If U.S. growth continues to outpace that of other developed countries, sustained strength in the Dollar may also act as a headwind to domestic inflation by maintaining downward pressure on commodities and reducing the price of foreign goods compared to their domestic counterparts.

Core inflation remains persistently low, and recent FOMC minutes suggest that the committee expects inflation to remain below 2% over the next few years.  Moreover, the minutes suggest that the primary risks for GDP growth and inflation were still skewed to the downside – which would seemingly support the “lower for longer” policy stance on interest rates.  Nonetheless, policymakers may still feel compelled to test the waters by raising rates next year, at the same time creating a bit of breathing room should the need to provide some further stimulus arise.

Market Perspectives (November 2014)

by Jim Baird on November 17, 2014

Executive Summary

  • Volatility returned to the markets in full force in October, with the principal indicators of volatility in equities and fixed income hitting their highest levels in over a year.
  • Domestic stocks made up ground lost in the first two weeks of the month to close with healthy gains, while fixed income markets also made it through the month on the positive side.
  • Small cap equities did well in October, but their performance still lags the large and mid caps year to date. Overseas stocks presented a mixed bag, though the announced extension of the Bank of Japan’s stimulus program prompted a late surge on Asian markets.
  • The bond market continues to show surprising strength, beating early year predictions as rates have fallen since January.

Real the full article>>

Q3 GDP Research Notes

October 31, 2014

Economic growth of 3.5% tops expectations in third quarter The first estimate for third quarter GDP was released this morning, suggesting the economy expanded at a 3.5% annualized pace, exceeding the consensus expectation for a 3% gain. The first half of the year was a tale of two quarters – the first was shockingly poor […]

Read the full article →

October’s Consumer Confidence Research Notes

October 28, 2014

Confidence soars in October, reaching highest point in seven years Consumer Confidence in October soared to 94.5, well above last month’s upwardly revised reading of 89.0 and smashing the consensus expectation of 87.0.  That result also marked the highest point for the Index since 2007. Since falling to an all-time low in February 2009 in […]

Read the full article →

Economic Perspectives (Third Quarter 2014)

October 20, 2014

Despite some weakness throughout developed economies internationally, most economic indicators in the U.S. appear to have gradually improved in recent months.  Overall, the economy appears on track to sustain a moderate pace of expansion during the closing months of the year. Read the full article>>

Read the full article →

Market Perspectives (October 2014)

October 16, 2014

Executive Summary Capital markets sold off broadly during September. Domestic equities fell throughout the month, led lower by small cap names, which declined enough to pull the index into negative territory thus far for the year. The yield curve steepened during the month, as short-term rates remained anchored near zero and rates between 10 and […]

Read the full article →

September’s Employment Situation Research Notes

October 7, 2014

Jobless rate falls to six-year low; nonfarm payrolls surge The jobs picture continued to improve in September, as the economy added 248,000 payrolls during the month. Today’s report easily exceeded market expectations of 215,000 new jobs. Adding to the good news, August payrolls were revised sharply higher from the preliminary estimate of 142,000 to 180,000. […]

Read the full article →

September Perspectives Podcast

October 1, 2014

A new PMFA Perspectives Podcast is now available via the link below: September Market Perspective Podcast

Read the full article →

Market Perspectives (September 2014)

September 22, 2014

Executive Summary Domestic equities extended their rally in August, nearing double-digit returns year to date. Small caps led the pack but continue to trail for the year. Developed international equities lost ground during the month for U.S.-based investors, as the dollar strengthened. This expanded the underperformance gap between international stocks and their domestic counterparts since […]

Read the full article →

August Retail Sales Research Notes

September 12, 2014

Retail sales surge; sentiment reaches highest point in over a year The University of Michigan Consumer Sentiment Index rose to 84.6 in September, easily beating expectations.  That result marked a high-water mark for the index for the year, driven higher by a sharp improvement in expectations for the economy over the coming year. Earlier this […]

Read the full article →