Market and economic update: Global economy feels the effects of Russia/Ukraine conflict

Improvements in the global economy appear to have been derailed by sanctions against Russia in light of the Ukrainian conflict. Data from Europe and Japan seem to indicate slowing economies, likely leading to further expansion of monetary accommodation, although accelerating growth will possibly require fiscal stimulus.

In contrast, data for the United States continued to be positive last week, led by better consumer data, such as retail sales, consumer credit, and consumer confidence. Economic growth remains on track for the Federal Reserve to begin to normalize interest rates in the first half of 2015.

U.S. retail sales grew 0.6% for the month of August (5% over the past year), led by improvements in auto sales and also home improvement store sales. Consumer confidence improved and consumer credit expanded $26 billion in July for a year-over-year growth rate of 7%, the fastest pace since 2011. The consumer has been the key base for economic improvement in the United States and remains the primary driver of economic activity. This year we expect growth to be supported by further recovery in the housing market, although still well below normal levels, and improvements in capital spending, where we are seeing signs of progress.



Data for Japan indicated the economy remains on soft footing due to slower machinery orders, moderating inflation, and weaker consumer confidence. The trade balance worsened and second-quarter GDP growth was revised to an annualized decline of more than 7%. July industrial production rebounded from weakness reported in June. However, inflation indicators continue to point to risks of deflation.

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Past performance is no guarantee of future results. All performance data, while deemed obtained from reliable sources, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for investment.

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