Select Page

Economic Update

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.

***

This report is prepared for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or service.  Market prices and other data may be obtained from outside sources and is not warranted as to completeness or accuracy. Any comments, statements and/or recommendations made herein are subject to change without notice, and may not necessarily reflect those of Alamo Capital.  Past performance does not guarantee future results.  Alamo Capital has no affiliation with any political party. Investing involves risk. Consult with a Financial Professional for additional information to determine the suitability of this or any other financial product or issue as it relates to your particular situation.