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Clarksville, TN – There were relatively few surprises in the economic data reports. Real GDP rose at a 2.5% annual rate in the 2nd estimate for 4Q13 (vs. +3.2% in the advance estimate).
Consumer spending was not as strong as estimated earlier, but was still respectable (a +2.6% pace, vs. +3.3%). Business fixed investment was revised higher (+7.3%, vs. +3.8%).Government subtracted more than a full percentage point from GDP growth (partly reflecting the government shutdown).
Inventories rose less than estimated earlier, but still faster than in the third quarter (inventory growth ought to slow, subtracting from GDP growth, in the first half of 2014).
New home sales bucked the recent trend of weather-related weakness in January, but that’s largely because more than 80% of sales come from the South and the West.
In the second round of her monetary policy testimony (delayed two weeks because of the weather) Fed Chair Yellen once again did not rock the boat. Deviating briefly from her written testimony, Yellen recognized that much of the recent softness in the economic data has been weather-related, but she added that it was difficult to say exactly how much.
While not on a preset course, the tapering of asset purchases is expected to proceed “in measured steps” (-$10 billion per policy meeting) unless there is a significant change in the economic outlook.
The stock market seemed to be looking for good news, and embraced the minor positive aspects of the economic data reports and Yellen’s testimony. The stock market, which often “climbs a wall of worry,” ignored turmoil overseas (Ukraine’s politics, China’s economy).
Next week, the ISM Manufacturing Index is likely to rebound from weather effects, setting the tone for the week. However, the February Employment Report will carry more weight. We may see a rebound from January’s weather (teachers and bus drivers, retail), but a moderate pace of payroll growth otherwise. The unemployment rate is expected to hold steady at 6.6%, but the trend is clearly lower.
Consumer Money Rates
Treasury Yield Curve – 02/28/2014
S&P Sector Performance (YTD) – 02/28/2014
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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 February 27th, 2013.
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