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Economic Update

December 9, 2013

Economic themes: Fed, Employment, GDP, Personal Income & Outlays, Consumer Sentiment, Chinese Exports, Germany.

  • Fed: Everyone is watching the Fed.  In a recent Bloomberg survey, 34% of economists predicted the Federal Reserve will commence tapering its quantitative easing program during the upcoming meeting scheduled for December 17-18.  Meanwhile, Congressional negotiators are working on a deal to curb automatic spending cuts by the December 13th deadline.
  • Employment: Nonfarm payrolls increased by 203k in November, above forecasts of 180k, and the unemployment rate fell to a 5-year low of 7.0%.  The increases were led by private services up 152k and goods producing jobs up 44k.  Wages increased 0.2%, in line with forecasts and the average work week was in line with forecasts at 34.5 hours.
  • GDP: Gross domestic product increased by 3.6% in the third quarter, above forecasts of 3.1%, led by inventory growth, personal consumption expenditures, and residential and nonresidential fixed investments.  The GDP price index increased by 2.0%, above forecasts of 1.9%, more in line with the Fed’s objectives.
  • Personal Income & Outlays: Consumer spending increased by 0.3% in October, led by auto sales.  Income fell by 0.1%, likely a result of the government shutdown.  The price index is up 0.1% on the month and 0.7% on the year, a bit weaker than the Fed’s objective.
  • Consumer Sentiment: The University of Michigan’s consumer sentiment index posted an 82.5 early December reading, above a forecast of 75.5, and the highest since July which was led by gains in the current conditions and expectations components.  The report bodes well for December retail sales.
  • Chinese exports: China reported that exports increased by 12.7% in November with the trade surplus up 8.7% to $33.8 billion, while inflation fell slightly to 3% as food prices fell.  The numbers are viewed as a positive for the global economy.
  • Germany: Industrial production unexpectedly fell 1.2% in October, missing forecasts of a 0.8% increase, as Europe’s recovery continues to be choppy.
  • Economic highlights for the week ahead:
    • Thursday, 12/12/2013: Jobless Claims, Retail Sales.
    • Friday, 12/13/2013: Producer Price Index.

Municipal market themes: Fresno, CA, Puerto Rico, Detroit, MI.

  • Fresno, CA: S&P downgraded the central valley city’s lease revenue debt to ‘BB+’ from ‘BBB-’ citing a weak economy and weak budgetary performance.  The outlook is stable.
  • Puerto Rico: The commonwealth’s economic activity index increased by 0.6% in October but is down 5.4% over the past year. 
  • Detroit, MI: A federal judge approved the distressed city’s $18 billion Chapter 9 filing, and stated that pensions may be cut in bankruptcy.  Bond market participants are actively watching how they will treat the city’s $369 million in unlimited general obligation bonds.


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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