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Economic Update

September 15, 2014

Economic themes: Industrial Production, FOMC, Scotland, Retail Sales, Consumer Sentiment.

  • Industrial Production: The index of industrial production declined by 0.1% in August, compared to forecasts of a 0.3% increase, though is not having too much of an impact due to market participants discounting the weak figure on the retooling of automobile plants. Manufacturing led the figure lower, declining by 0.4%, due to the aforementioned automotive weakness.  Strength was seen in mining and utilities.
  • FOMC: The Federal Reserve will have their meeting announcement on Wednesday, when they are expected to announce a reduction in the quantitative easing program by an additional $10 billion per month, with an end to it to be announced after the October meeting. They are expected to continue to reinvest maturing securities, and the Federal Funds futures contracts continue to call for a mid-2015 increase.  Market participants will be heavily focused on the language of the announcement, specifically as it pertains to employment and inflationary data.
  • Scotland: On Thursday, Scotland will vote on their independence from the United Kingdom. Scotland is interested in independence due to oil and gas wealth.  However, a vote in favor of independence could have consequences on the nation’s currency and debt markets, as there is no central bank, and some large Scottish firms could move to England due to the inherent uncertainty involved in the transition.
  • Retail Sales: The consumer is showing continued strength, as retail sales increased by 0.6% in August, led by automobile sales, building materials, and food services. Declines were seen in gasoline and general merchandise.
  • Consumer Sentiment: The Reuters/University of Michigan consumer sentiment index posted an 84.6 reading in September, led by gains in the expectations component, though was held back by weakness in the current conditions component. Consumers have been benefiting from weaker gas prices, and modest inflation.
  • Economic highlights for the week ahead:
    • Tuesday, 9/16/2014: PPI.
    • Wednesday, 9/17/2014: CPI, FOMC Announcement.
    • Thursday, 9/18/2014: Housing Starts, Jobless Claims.

Municipal market themes: Detroit, San Bernardino.

  • Detroit: The bankrupt city agreed to terms with the insurance company, Syncora, in a “very complicated and creative solution,” involving a combination of cash, property, and asset leases. The two sides have been in litigation over the past year over the treatment of $400 million in certificates of participation.  Next on the docket for Detroit is to reach approval with limited tax general obligation bondholders and retirees.

San Bernardino: U.S. Bankruptcy Judge Meredith Jury notified the bankrupt city that they may reject its current collective bargaining agreement with the firefighters union and may impose changes to cut costs, including requiring members to contribute to their pensions.


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.


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