November 25, 2013
Economic themes: FOMC Minutes, Housing, Retail Sales, Pricing Indexes.
- FOMC Minutes: In the latest release from the Fed, they affirmed that economic activity continues to grow at a moderate pace and tapering will continue to be data dependent. Although delayed data associated with the government shutdown created a murky view of the economy. Much of the focus continues to be when to commence tapering and by how much. A current forecast among economists calls for tapering to commence after the March Fed meeting, reducing asset purchases from $85 billion/month to $70 billion/month.
- Housing: Pending home sales fell 0.6% in October to 102.1, representing the 5th consecutive monthly decline as rising home prices and mortgage rates have slowed buyers. Existing home sales fell 3.2% in October to a 5.12 million annual pace representing the 3rd consecutive monthly decline which is up 6% year-over-year.
- Retail Sales: October retail sales increased 0.4% above expectations of no change, led by autos, electronics, furnishings, and clothing with declines seen in building materials and garden equipment.
- Pricing Indexes: The consumer price index fell by 0.1% in October, below expectations of no change which were led by declines in energy and gasoline. Increases were seen in airline fares, recreation, and housing. CPI inflation slowed to 0.9%, from 1.2% in September. The producer price index declined 0.2% in October, in line with expectations and held down by declines in energy. The index is up 0.3% year-over-year and is up 1.4% less food and energy.
- Economic highlights for the week ahead:
- Tuesday, 11/26/2013: Housing Starts, S&P Case-Shiller HPI.
- Wednesday, 11/27/2013: Durable Goods Orders, Jobless Claims, Consumer Sentiment.
Municipal market themes: California, Foothill/Eastern, Los Angeles Redevelopment, Jefferson County, AL.
- California: The Legislative Analyst’s Office is projecting a $2.2 billion operating surplus for this year and a $3.2 billion operating surplus for next year, as the volatile personal income tax figures have been very strong, related to capital gains taxes from the equity market rally. Governor Brown is encouraging Sacramento to use the surpluses to pay down “the wall of debt,” yet many others in Sacramento have different ideas.
- Foothill/Eastern: The toll road will bring a $2.2 billion restructuring deal which will extend the final maturity to 2053 from 2040, making debt service more sustainable as toll revenues have been below forecasts.
- Los Angeles Redevelopment: A conduit is organizing a refunding for $200 million in redevelopment agency bonds across seven agencies, including Alhambra, Claremont, Covina, the City of Los Angeles, Lynwood, Monterey Park, and West Hollywood.
- Jefferson County, AL: A bankruptcy court has approved Jefferson County’s plan to exit from bankruptcy subject to a 14-day appeal period. The most likely appealer would be ratepayers of the sewer system, although an appeal would not delay implementation of the rate adjustments.
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