Oct 29, 201404:37 PMOpen Mic
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Market and economic update: Economic activity outside the U.S. continues to appear sluggish
Market attention remains focused on monetary policy authorities and the likely direction of policy. U.S. economic data have been modestly supportive of a conclusion to Federal Reserve tapering this week, with September consumer prices rising just 0.1% and year-over-year prices (excluding food and energy) rising 1.7%. Falling energy prices remain a drag on inflation, but rising home prices reflect strengthening domestic economic activity. We expect U.S. economic activity to moderate from the 4.6% pace in the second quarter to average 3% over the last half of 2014 and into 2015.
Economic data last week from outside the United States seem to indicate some stabilization in activity, although at a relatively low level. Flash purchasing manager index (PMI) survey estimates for Japan, Germany, and China stabilized at recent low levels of growth, although the survey for France indicated further deterioration in activity. September leading indicators for China improved, while third-quarter year-over-year gross domestic product (GDP) growth slowed by 0.2% to 7.3%. Economic activity outside the United States appears sluggish, with slowing inflation and moderating activity. Risks of recession in Europe seem to be on the rise and the efficacy of monetary policy in Japan seems to be waning. Economic activity in China appears to be slower than the government’s target pace, indicating further stimulus may be required to keep growth on target.
For more information, go to https://reserve.usbank.com/insights/market-economic-update-10-27-14.
Robert L. Haworth, CFA, is a senior investment strategist and Darrell Behnke is the Madison market leader for the Private Client Reserve of U.S. Bank.
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