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Clarksville, TN – Real GDP rose at a 3.2% annual rate in the advance estimate for 4Q13, about as expected, but the details were a bit surprising. Consumer spending and business fixed investment, the key components, each rose at a respectable pace.
However, inventory growth, already elevated in 3Q13, rose further (and will likely subtract from GDP growth in 1H14). Net exports (a smaller trade deficit) added. Residential home building and government subtracted. Personal income figures rose meagerly in 4Q13, suggesting that we may see some slowing in spending ahead.The Fed lowered the monthly pace of asset purchases by another $10 billion (to $65 billion, vs. $75 billion in January and $85 billion in 2013). The tapering of asset purchases is “not on a preset path,” according to the Fed, but officials expect to make further reductions “in measured steps” as the economy improves.
The busy economic calendar did not distract U.S. market participants from worries about emerging economies. The stock market was choppy. Bond yields fell.
Next week, the ISM manufacturing data may set the early tone, although investors are expected to keep an eye on emerging market developments. The employment report is always important for the financial markets, but there’s a lot of uncertainty heading on the January release.
Seasonal adjustment is a bit tricky and can magnify any weather effects. We’ll get annual benchmark revisions to the payroll data, which will include a correction in the methodology (shifting about 469,000 workers from private households, not included in the establishment survey, into healthcare services).
Extended unemployment benefits expired for 1.35 million at the end of 2013. Some of these people may give up looking for a job, reducing labor force participation and the unemployment rate.
Consumer Money Rates
Treasury Yield Curve – 01/31/2014
S&P Sector Performance (YTD) – 01/31/2014
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.
Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business January 30th, 2013.
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