Clarksville, TN – The economic data were mixed, but consistent with the theme of global softness and domestic strength. Unit auto sales improved further in September – and, combined with the August data on personal income and spending, suggest that inflation-adjusted consumer spending (70% of GDP) is on track to have expanded at an annual pace of 3.5% to 4.0% in 3Q15.
The trade deficit in goods widened sharply in August, with that split evenly between stronger imports (despite lower oil prices) and weaker exports. Net exports and an inventory correction are expected to subtract significantly from 3Q15 GDP growth, but underlying domestic demand appears to have remained strong.The September Employment Report disappointed, but was hardly a disaster. Nonfarm payrolls rose less than the median forecast, while the two previous months saw downward revisions.
Market participants appear to have been leaning in the wrong direction, likely braced for an upside surprise (relative to expectations). Note that seasonal adjustment can be tricky in September, due to the start of the school year and the end of the summer travel season. It’s possible that increased seasonal hiring in May and June simply led to more seasonal layoffs in August and September.
Prior to seasonal adjustment, the economy added 1.5 million jobs in education, about what we saw a year ago. However, non-education jobs fell by 958,000, vs. 812,000 last year. The unemployment rate held steady, but labor force participation dropped (although not for the key 25 to 54 age cohort, suggesting seasonal adjustment issues for teenagers and young adults). Average hourly earnings were flat, up 2.2% y/y (in comparison, the Consumer Price Index rose 0.3% over the 12 months ending in August).
Next week, the economic calendar thins. The ISM Non-Manufacturing Index has some market-moving potential. The IMF will issue its latest World Economic Outlook on Tuesday. Fed policy meeting minutes are unlikely to tell us anything new, but there’s always a chance that the financial markets will take something out of context.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.513||1.619|
|Dollars per Euro||1.120||1.262|
|Japanese Yen per Dollar||119.930||108.890|
|Canadian Dollars per Dollar||1.327||1.116|
|Mexican Peso per Dollar||16.923||13.455|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||3.25||3.44|
Treasury Yield Curve – 10/02/2015
As of close of business 10/01/2015
|Oct 5th||—||ISM Non-Manufacturing Index (September)|
|Oct 6th||—||Trade Balance (August)
IMF World Economic Outlook
|Oct 8th||—||Jobless Claims (week ending October 3rd)
FOMC Minutes (September 16th-17th)
|Oct 9th||—||Import Prices (September)|
|Oct 12th||—||Columbus Day (bond market closed)|
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 September 24th, 2015.