Clarksville Weekly Market Snapshot from Frazier Allen for the week of September 7th, 2014

Clarksville, TN – The economic data were mixed. ISM surveys were stronger than expected. Unit auto sales rocketed to a 17.4 million seasonally adjusted annual rate, the strongest pace since January 2006.

The Fed’s Beige Book, the summary of anecdotal economic information from the 12 Federal Reserve districts, was essentially more of the same (growth described as “modest to moderate”). The August Employment Report was disappointing.

Nonfarm payrolls rose by 142,000 (median forecast: +225,000), while June and July were revised a net 28,000 lower. Payroll growth was restrained in August by a seasonal quirk in autos and by labor strife at a New England grocery chain, but that impact (up to 25,000 jobs) wasn’t enough to fully explain the miss in the headline payroll number.

The unemployment rate edged down to 6.1%, but results varied by age cohort (down for teenagers and young adults, suggesting possible issues with the seasonal adjustment, and slightly higher for prime-aged and older workers). Average hourly earnings rose 2.1% y/y (in comparison, the CPI rose 2.0% over the 12 months ending in July).

The European Central Bank’s Governing Council surprised the financial markets by cutting short-term interest rates. In his press conference, ECB President Mario Draghi announced that a program to purchase asset-backed securities would begin in October.

Draghi said that these securities would be accepted as collateral and would not be purchased outright – hence, technically not “quantitative easing” – but Draghi indicated that the ECB could embark on real QE (that purchases of sovereign debt) if needed. The euro fell on the news.

Next week, the economic calendar thins out considerably (the following week will more than make up for that). The retail sales report is the obvious highlight and should get more attention than usual, following the soft reading in July.

Increased motor vehicle sales should dominate the report, but we should see a strong rebound otherwise (tempered somewhat by lower gasoline prices). Attention should turn ahead to the Fed’s policy meeting, while international investors are likely to eye the vote on Scottish Independence.

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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 September 3rd, 2014.

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