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Clarksville, TN – The economic data reports were mixed and mostly ignored by the financial markets. Real GDP rose at a 2.6% annual rate in the 3rd estimate for 4Q13 (vs. +2.4% in the second estimate and +3.2% in the advance estimate).
Most of the story remained that same. Government subtracted a full percentage point from overall growth, but that was offset by a narrower trade deficit (which added a percentage point).Inventory accumulation remained very brisk, although slightly slower than in 3Q13. However, consumer spending was revised to a 3.3% annual rate (vs. +2.6% in the 2nd estimate and +3.3% in the advance estimate), with most of that revision in healthcare.
Personal income and spending rose about as expected in February, although the PCE Price Index, the Fed’s chief gauge of inflation, rose 0.9% y/y overall and +1.1% y/y ex-food & energy (vs. the Fed’s official goal of 2.0%).
Looking ahead, most of the economic data reports for March and April are expected to reflect a rebound from adverse weather in January and February. Hence, the numbers may make growth look stronger than it really is. As a simple rule, one can take the average of recent months to approximate the underlying trend.
Next week, fresh March figures will arrive. The focus is likely to be on the ISM Manufacturing Index (Tuesday) and the Employment Report (Friday). Seasonal adjustment can be a bit tricky in March. Economic activity, including job growth, typically ramps up in the spring (we can expect to add between 800,000 and 900,000 jobs in March before seasonal adjustment).
While the job market has shown signs of steady improvement over the last few years, we’re still a long way from a full recovery. Fed Chair Yellen’s speech on Monday is not expected to be market-moving (but you never know). Keep an eye out for any developments on the Ukraine/Russia border.
Consumer Money Rates
Treasury Yield Curve – 3/28/2014
S&P Sector Performance (YTD) – 3/28/2014
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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 March 27th, 2013.
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