As I watch snow fall outside my office in Monument, CO I’m forced to remember that winter has come to a close for the majority of the nation. I force this reminder on myself because it is reflected in upbeat economic data reported over the last week. Data that supports the idea that much of the weak information across the winter months was attributable to harsh weather… It doesn’t make me feel much better about the snow outside.
Domestic Data:
Much of the data last week was positive, such as:
– Capital goods (business Investment) orders were up substantially.
– Existing homes sales fell less than expected.
– Consumer Sentiment rose to 84.1, a 9 month high.[1]
Strong consumer sentiment and improving capital investment could bode well going into the summer months for economic development, however it’s still to be seen if this is merely the result of a pent up winter demand or a true strengthening of economic conditions.
Residential real estate has continued to struggle in 2014. While home prices continue to rise, 6.9% year over year through February, sales have fallen off. New home sales, which makes up 10% of the home market, fell much harder than existing homes, down 14.5% month over month in March.[2] While business investment appears to be picking up (approximately 16% of GDP), it appears that housing which saw a brief renaissance last year may not be a large contributor to the economy in 2014. This year should be marked with inflated prices and elevated mortgage rates (comparatively speaking), keeping many buyers out of the market.
With 1st quarter earnings season underway, most companies are beating earnings estimates however, sales projections have been missed at a rate much higher than the historical average. This could be the sign needed to cause hiring and capital expenditure. This could be the result of winter conditions, but a lack of capital investment is more likely the culprit.
International
Russia and Ukraine tensions continue to quell any positive data coming out of the US and Europe. Concerns of on-going sanctions as well as the potential for military action (on anyone’s part) have kept the bulls at bay. Further Russian action could cause what has been minimal sanctions to turn into broad sanctions on a sector such as energy exports.
European data continued to impress last week:
– German PMI (Both Manufacturing and Services) were up
– European PMI (Both Manufacturing and Services) were up
– French PMI (Both Manufacturing and Services) slid, but remains expansionary
– Spanish 10 year note auction saw rates fall .232%[3]
– Great Britain saw strengthening retail sales
Japan suffered another blow to its continued weak inflation environment as National Core CPI stayed flat at 1.3% year over year.[4] Japan elevated tax rates in April, this may cause a slowdown in economic performance in coming months.
For more information:
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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment. Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.