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Economic Update

September 29, 2014

Economic themes: Geopolitical, GDP, Personal Income & Outlays, Housing, Durable Goods.

• Geopolitical: Adding another tool to the geopolitical risk quiver, residents in Hong Kong are protesting in hopes to move towards a more democratic state. Hong Kong currently benefits from free speech and civil liberties, although under an authoritarian regime. China has pledged to give Hong Kong universal suffrage beginning in 2017, but the legislature recently ruled that any candidate would have to be screened through a committee, which is essentially being viewed as a Beijing power grab. Meanwhile, President Obama stated on 60 Minutes the U.S. intelligence agencies underestimated the threat from Islamic State militants, and overestimated the Iraqi Army’s ability to combat them.
• GDP: Q2 Gross Domestic Product growth was revised upward to 4.6%, in line with expectations, with strength seen in inventories, exports, residential investment, and personal consumption. Chain-weighted prices increased by 2.1%, also in line with expectations. The figures confirmed the strong rebound in the second quarter, after a weak first quarter impacted by adverse weather conditions.
• Personal Income & Outlays: Personal income increased by 0.3% in August, and personal spending increased by 0.5%, with strength seen in the durables component. The PCE price index was unchanged for the month, and is up 1.5% over the past year. The figures demonstrate a moderately healthy consumer, benefiting from declining gas prices.
• Housing: Pending home sales fell by 1% in August to a 104.7 reading, compared to a forecast of a 0.8% gain, and is down 2.2% over the past year. The market is being held back by a decline in investors, a lack of first-time buyers, fewer distressed sales, and the prospective impact higher mortgage rates could have. New home sales surged 18% in August to a 504k unit pace, though the figure has been rather volatile.
• Durable Goods: Coming off of a surge in July aircraft orders, durables declined by 18.2% in August, compared to expectations of a 17.1% decline, although are up 8.9% over the past year. Transportation led the declines, with strength seen in fabricated metals, machinery, and electronics. Despite the decline in transportation, the figures bode favorably for manufacturing.
• Economic highlights for the week ahead:

o Tuesday, 9/30/2014: S&P Case-Shiller HPI.
o Wednesday, 10/01/2014: ISM Mfg Index.
o Friday, 10/03/2014: Employment Report, International Trade.


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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