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Economic Update

September 2, 2014

Economic themes: GDP, Manufacturing, Personal Income & Outlays, Housing.

  • GDP: Gross Domestic Product grew at 4.2% in the second quarter, above forecasts of a 4% increase, as the economy rebounded from a weak first quarter that was held back by adverse weather conditions.  The GDP price index increased by 2.1%, slightly above forecasts of 2%.  The economy continues to improve at a gradual pace.
  • Manufacturing: The ISM Manufacturing Index posted a 59 reading in August, well above forecasts of a 56.8 reading, led by strength in the new orders and production components.  The figure gives the Fed more room to ease monetary policy.
  • Personal Income & Outlays: Personal income increased by 0.2% in July, below a forecasted 0.3% increase; and personal spending fell by 0.1% in July, compared to a forecasted 0.2% increase.  The Personal Consumption Expenditures (PCE) price index increased 0.1%, and is up 1.6% over the past year, still below the Fed’s preferred gauge of 2%.
  • Housing: The S&P Case-Shiller Index fell by 0.2% in June and is up 8.1% over the past year.  Weakness was seen in the Minneapolis, Detroit, Atlanta, and Chicago regions.  Price declines are generally favorable for home sales; though hurt consumers’ balance sheets.  Pending home sales increased by 3.3% to a 105.9 reading in July, led by gains in the northeast, as the job market is improving, mortgages remain low and supply is increasing.
  • Economic highlights for the week ahead:

o    Thursday, 9/04/2014: International Trade, Jobless Claims.

o    Friday, 9/05/2014: Employment Report.

Municipal market themes: Napa

  • Napa: Both Moody’s and S&P stated that credits throughout Napa County will not have an immediate adverse impact from the 6.0 magnitude earthquake.  The city-owned water and sewer system was somewhat damaged by the quake, though repairs appear to be manageable.  The enterprise is supported by 662 days cash on hand as of 6/30/2013.

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