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May 14, 201404:47 PMOpen Mic

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Market and economic update for the week of May 12

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Last week was light in terms of U.S. data, although Janet Yellen’s Capitol Hill testimony seemed to indicate the U.S. economy is on the right track. Her testimony indicated she believes the economy was emerging relatively healthy from the winter slump of colder-than-normal weather and larger-than-normal amounts of snowfall.

One concern she cited, which the Federal Reserve will be watching, is the state of the housing market. Housing data has yet to rebound from its winter hibernation; however, we anticipate some recovery in activity should become evident as data from March and April is released and spring weather potentially brings a seasonal upswing in activity.

Two data components did not move markets but seemed to indicate potential future improvements in economic data. Weekly initial unemployment claims fell by 26,000 to 319,000, which indicates to us that we should expect the jobs market to continue to improve. Second, wholesale inventories grew 1.1% for the month, indicating some improvement in industrial activity to close out the first quarter. This week, April data will be in focus, which will provide us with a glimpse of U.S. economic activity post-polar vortex, including retail sales, inflation, industrial production, and housing starts.

Outside the United States, the European Central Bank (ECB) meeting was the key event. ECB President Mario Draghi indicated no changes at this time, but the committee was prepared to ease monetary policy at their next meeting in June. Inflation data for the eurozone remains well contained with producer prices falling 0.2% in March and retail sales growing just 0.9% for the prior 12 months. ECB easing will move toward a renewed expansion of monetary support, but we believe economic growth will likely remain quite modest in the eurozone.


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