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Economic Update

September 16, 2013

Economic themes: Fed, Industrial Production, PPI, Retail Sales, Consumer Sentiment

  • Fed: The much awaited Fed September meeting announcement is due Wednesday, where many market participants are speculating the Fed could commence tapering their quantitative easing (QE) program.  The consensus lies with QE being reduced from $85 billion per month to $75 billion per month. In related news, Democrats convinced economist Larry Summers to withdraw his candidacy to replace Chairman Ben Bernanke due to his stance on regulations.  Summers was a known critic of quantitative easing and may have placed more pressure to end the program sooner and/or faster than other candidates.
  • Industrial Production: Coming close to expectations, industrial production increased by 0.4% in August, led by manufacturing, durable goods, and autos, though held back by non-durables, utilities, and mine production. The strength in industrial production gives the Fed more room to taper.
  • PPI: The producer price index increased 0.3% in August, and is up 1.4% year over year, with notable gains in food and energy.  The numbers are below the Fed’s comfort level, giving some support towards a slower tapering of the QE program, from the inflation component.
  • Retail Sales: After a big July, retail sales increased by 0.2% in August, below estimates of 0.5%, led by autos, furniture and appliances, and held back by building materials, clothing, and sporting goods.
  • Consumer Sentiment: The Reuters/University of Michigan consumer sentiment index posted a 76.8 reading for September, below estimates of 82, with the consumer concerned about a potential military strike in Syria, which has since faded somewhat; and weakness in the expectations component.
  • Economic highlights for the week ahead:
    • Tuesday, 9/17/2013: CPI.
    • Wednesday, 9/18/2013: Housing Starts, FOMC Announcement.
    • Thursday, 9/19/2013: Jobless Claims, Existing Home Sales.

Municipal market update: Puerto Rico, California, WCIE.

  • Puerto Rico: Bonds for the island commonwealth have been trading rather choppy lately.  A combination of events have contributed to this including an August refunding, a contraction in economic activity, rather unfavorable media scrutiny, and forced redemptions from State specific funds utilizing the triple tax benefits, among others.  However, Governor Padilla has implemented a number of reforms including to pensions and taxes, which have put the commonwealth on stronger footing, despite a weak economy.  While the selling may have created an opportunity for certain speculative buyers, we encourage investors to not be overexposed to the commonwealth.  For more information, please discuss with the Investment Information department.
  • California: August revenues totaled $6.91 billion for the State, $27 million short of estimates, due to personal income taxes being slightly less than forecasted.  Meanwhile, UCLA released a report saying California’s economic recovery has benefitted the coastal regions notably more than the inland regions, as they have benefitted from investment, technology, and trade.
  • WCIE: The West Coast Infrastructure Exchange, a partnership between California, Oregon, Washington, and British Colombia, is working to set terms of how to identify, measure, and select projects; addressing unmet infrastructure needs shared across the region.



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 orservice.  Market prices and other data may be obtained from outsidesources and is not warranted as to completeness or accuracy. Any comments, statements and/or recommendations made herein are subject to change withoutnotice, 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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