January 21, 2014
Economic themes: IMF, CPI, PPI, Housing, Industrial Production.
- IMF: The International Monetary Fund increased their forecast for global growth to 3.7% for 2014, from a forecast of 3.6% in October, as expansions in the U.S. and U.K. accelerate. They encouraged advanced economies to continue their unprecedented accommodative monetary policies and predicted the Federal Funds Rate will increase in 2015.
- CPI: The Consumer Price Index increased by 0.3% in December, 0.1% excluding food and energy; and is up 1.5% year-over-year, 1.7% excluding food and energy. The weak inflationary figures could have the Fed shift focus from unemployment to spurring inflation.
- PPI: The Producer Price Index increased 0.4% in December, and is up 1.2% year-over-year, led by increases in energy, gasoline, and tobacco, although offset by declines in food prices.
- Housing: Housing starts fell 9.8% in December to a 999k pace, following November’s 23.1% surge, and are up 1.6% year-over-year. Permits fell 3% to a 986k pace, and are up 4.6% year-over-year. The pace continues to be positive, although this implies somewhat of a slowdown.
- Industrial Production: Manufacturing appears to be coming back, as industrial production increased by 0.3% in December, and is up 3.7% year-over-year, with gains seen in manufacturing, representing the 5th consecutive monthly increase, motor vehicles, utilities, and mining.
- Economic highlights for the week ahead:
- Thursday, 1/23/2014: Jobless Claims, Existing Home Sales.
Municipal market themes: California Schools, PR Electric, California Rail.
- California Schools: Moody’s Investors Service stated the proposed fiscal 2014/15 California budget is good for local school and college districts, as it eliminates the $6.2 billion backlog of deferred state aid payments, and increases new funding for schools by $4.8 billion. They see the most significant beneficiaries being Los Angeles, Long Beach, and Fresno Unified School Districts.
- PR Electric: Puerto Rico Governor Alejandro Padilla has proposed two bills to reform the Commonwealth’s electric system, including one to promote reliable service, increase transparency, and include public participation in rate setting; with the second proposing the establishment of a Commission on Energy and Telecommunication to aid in regulation.
- California Rail: In the wake of stopping an $8 billion general obligation bond offering, Rep Jeff Denham will introduce a bill to suspend Federal Rail Administration payments until the State can fund the required 50%. $180 million of the matching funds is required to be paid on April 1st. Under the 2014/15 budget, funds may be available from the State’s cap and trade emissions.
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