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Economic Update

March 16, 2015

Economic themes: Fed, Industrial Production, PPI, Consumer Sentiment.

  • Fed: The Federal Reserve will announce the results of their March meeting on Wednesday, March 18, 2015, where many market participants anticipate they will remove the “patient” language from their approach to monetary policy. Effectively, bad news is good news and good news is bad news, as it plays on the probabilities of the Fed making changes to their interest rate policies.
  • Industrial Production: The manufacturing sector showed weakness in February, as industrial production posted a 0.1% gain, below forecasts of a 0.3% gain. The manufacturing component posted a -0.2% decline, marking the third consecutive monthly decline.  Weakness was seen in vehicles and mining, while strength was seen in aerospace.
  • PPI: The Producer Price Index declined by 0.5% in February, compared to forecasts of a 0.3% increase, and is down by 0.7% over the past year. Weakness was seen in the energy and food components, though the energy component showed some stabilization after declining since the summer.  Lack of inflation at the producer level could encourage an accommodative policy stance from the Fed.
  • Consumer Sentiment: The University of Michigan’s consumer sentiment index posted a 91.2 reading for March, compared to forecasts of a 96 reading, due to weakness in the current conditions and expectations components. The consumer had benefited from declining energy costs, which have rebounded somewhat over the past few weeks.  Employment gains could contribute to better readings in future months.
  • Economic highlights for the week ahead:
    • Tuesday, 3/17/2015: Housing Starts.
    • Wednesday, 3/18/2015: FOMC Meeting Announcement.

Municipal market themes: Daughters of Charity, Puerto Rico, COPIA.

  • Daughters of Charity: Prime Healthcare backed out of their agreement to acquire Daughters of Charity Health System due to “onerous conditions” placed on the transaction by California Attorney General Kamala Harris, specifically the condition to maintain all of Daughters services for 10 years. Daughters will pursue new buyers, with the possibilities ranging from selling the whole system to one buyer, piecing out the hospital’s components to individual buyers or filing for Chapter 11.  The hospital has stated it will be able to fulfill its bond payments while they seek a new buyer.
  • Puerto Rico: The Commonwealth reported that the Government Development Bank’s liquidity position improved by $33 million in February and general fund revenues was $6 million short of forecasts. The Infrastructure Financing Authority announced plans to issue two-year notes at a yield of 8.25%, and is continuing to work on as much as a $2.9 billion deal secured by petroleum tax revenue.
  • COPIA: ACA Financial Guaranty has entered into an agreement to sell Triad Development the 17-acre COPIA site in Napa. They intend to redevelop the property into a “delightful mixed-use destination.”  Terms of the sale have not been released, it has not yet closed, and Triad has not committed to a specific use of the property.  The site was last appraised in March 2009 for $24.8 million.


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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