U.S. economic data this week was mixed. The New York Fed’s Empire Manufacturing Index rose to 10.16 from a prior 6.17, but was below the Street consensus of 12.00. Prints over 0.00 indicate improving conditions. New Orders jumped to 9.17 from a prior -1.73. Shipments spiked to 11.83 from a prior 1.12. However, these positive components masked some which were more concerning. Inventories fell to 0.00 from a prior 2.27. This might indicate that the holiday inventory buildup is behind us. The Number of Employees component slipped to 8.51 from a prior 10.23. This indicates that while businesses continued to hire, they did so at a somewhat slower pace. More concerning was the drastic decline in the work week. The Average Workweek component fell to -7.45 from a prior -1.14. This indicates that while businesses are hiring, part-time work is making up an increasingly larger portion of available jobs. We do not expect this trend to reverse anytime soon.
Industrial Production unexpectedly slowed, coming in at -0.1% versus a prior +0.8% (down from +1.0%) and below the Street consensus of +0.2%. Capacity Utilization also declined, coming in at 78.9% versus a prior revised 79.2% (down from 79.3%) and a Street consensus of 79.3%. Manufacturing Production came in at 0.2%. This was unchanged from the downwardly revised prior 0.2% (from 0.5%) and in line with the Street consensus. Utilities, mines and automakers all reported less production. Some market participants were optimistic that the strong September data augured well for strong October data. However, the October data indicated that the economy is still in a pattern of strong months followed by pull-backs. It appears that the U.S. economy could be on track for a sub-3.00% Q4 GDP, even if consumers spend more thanks to lower fuel prices.
How Many Shopping Days?
As this is yesterday was Municipal Monday we will touch briefly on topic. We expect new issuance to increase over the next two weeks. This supply could put downward pressure on prices. However, the municipal bond market (as well as the bond market as a whole) tends to quiet down in December. If you are considering adding municipal bonds to portfolios, the next two weeks might be your last best chances in 2014.
By Thomas Byrne – Director of Fixed Income – Investment Consultant
Thomas Byrne brings 26 years of financial services experience to Wealth Strategies & Management LLC. He spent the last 23 years as Director of Taxable Fixed Income for Citigroup, Inc. and predecessor firms in New York, NY. During the course of his long fixed income career, Mr. Byrne was responsible for trading preferred stock, corporate bonds, mortgage backed securities, government debt, international debt and convertible bonds. Mr. Byrne was also responsible for marketing, sales, strategy and market commentary within the taxable fixed income markets.
- November 2012 – Present, Wealth Strategies & Management LLC, Stroudsburg PA
- December 2011 – November 2012 – Bond Squad, Kunkletown, PA
- April 1988 – December 2011, Citigroup and predecessor firms, New York, NY
- June 1986 – March 1988 – E.F. Hutton, New York, NY
Director of Fixed Income
Wealth Strategies & Management LLC