See this week's numbersFriday, February 17, 2017

To March or not to March...

This week was all about the timing of the next Federal Reserve interest rate move. Comments from various Federal Reserve members and a string of solid economic reports spurred bets that a move could happen in March. Federal Reserve Chair Janet Yellen gave an upbeat assessment of the economy in her semi-annual congressional testimony this week. In between questioning, Yellen said a rate increase would be appropriate at “upcoming meetings” if job gains and inflation continue to move toward their goals. Yellen also repeated her warnings from January that “it would be unwise” to wait too long to raise rates. The Chair told the Senate Banking Committee the Fed would like to have interest rates at a level that provides room for cutting if they need to address economic weakness in the future. While this week’s comments are by no means an assurance of a rate increase in March, the financial markets took notice by reaching new highs in the stock market and briefly topping 2.50 percent on the 10-year Treasury note yield. The futures market, on the other hand, is predicting less than a 40 percent chance for a rate increase.

Other Key Indicators this Week:

Inflation – Both producer and consumer prices increased 0.6 percent in January. This was the largest monthly gain for producer prices since September 2012 and the biggest increase for consumer prices since February 2013. Surges in gasoline prices led the increase in both indices. A 7.8 percent gain in gasoline costs accounted for about half the increase on the consumer side, with the largest jump in almost seven years for clothing and auto prices rounding out the increase. On the wholesale side, gasoline costs rose 12.9 percent. Wholesale prices of goods increased 1.0 percent, the most in almost two years. Year-over-year wholesale costs were up 1.6 percent, matching last month’s highest rate since September 2014.

Retail Sales – It is always good to have a second look, and such is the case with the latest retail sales report. December sales were revised higher to 1.0 percent versus the original estimate of 0.6 percent. To top off that good news, sales in January rose 0.4 percent, about four times the expectations. Ten of the 13 major categories posted increases, led by electronics, appliances and sporting goods. Auto sales fell 1.4 percent after a 3.2 percent gain in December, the fastest monthly increase since mid-2005. Remove auto sales from the mix, and retail sales were up 0.8 percent.

Housing – Construction on new homes fell 2.6 percent in January. A 10.2 percent drop in multi-family housing led the decline. Single-family housing starts rose 1.9 percent, the first gain in three months. Two of the four major geographical areas, the South and the Northeast, posted double-digit increases, while the West and Midwest posted double-digit declines. Construction activity was up 10.5 percent from a year ago. The outlook for construction activity looks promising with a 4.6 increase in permits, the biggest gain in four months. In a separate report, homebuilder confidence slipped to 65 from 67. The survey was at 58 a year ago.

Between the Numbers:

After spending a record $19.7 billion last year, spending this Valentine's Day was expected to be $18.2 billion. The percentage of Americans celebrating the holiday has declined from 63 percent to 54 percent since 2007. Spending of $1.7 billion was projected on candy; $2 billion on flowers.

Sarina Freedland – Senior Investment Officer

Although this information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results. Changes in any assumption may have a material effect on projected results.

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