On Wednesday, the Federal Reserve will release its policy statement and revised economic forecast, which many are eager to analyze following last week’s turbulent market conditions. The US stock market experienced its most challenging week in several years, while crude oil prices plummeted to a five-year low. Despite this, the US economy is presenting some positive indicators, particularly highlighted by last week’s updates. Notably, the mid-December reading from the Reuters/University of Michigan’s consumer sentiment index surged to its highest level since January 2007. Retail sales also saw a more significant increase in November than many analysts expected. Furthermore, the US Labor Department reported a slight rise in job openings for October, nearing a 14-year high. The optimistic trend in these figures is likely to continue, with today’s report on industrial production and tomorrow’s housing starts data on the horizon. This positive momentum has led analysts to speculate that the Fed may begin raising interest rates in 2015, potentially around mid-year, as forecasted by many economists.
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● Abe reaffirms Japan’s reflationary policies following election success | Reuters
● China’s Central Bank anticipates GDP growth to slow to 7.1% in 2015 | MNI
● Germany’s Leading Index Declines in October | RTT
● Consumer Sentiment in the U.S. Hits an Eight-Year High | BusinessWeek
● Oil Price Drop Surprises Investors Who Bet on Recovery | Bloomberg
● Hong Kong’s Remaining Protest Site Has Been Cleared | Time
● Greek elections may pose new challenges for the Eurozone | Guardian
The Federal Reserve’s report on US industrial production for November is expected to show an increase of 0.3% compared to the previous month, according to The Capital Spectator’s median forecast based on various econometric estimates. This anticipated rise would signal a moderate recovery following a decline of 0.1% in October.
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As the year comes to a close, it’s time to revisit some notable titles featured in the weekly Book Bits column published here every Saturday morning. Below are five economics and finance books from the 2014 collection that merit a second look. Stay tuned for five more next week. Happy reading!
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The inflation forecast implied by the Treasury market continues to decline, recently falling to 1.70% on December 11—a level close to a four-year low. This is based on the yield spread between the nominal 10-year Note and its inflation-protected counterpart. While this decline appears concerning, it may be misleading, especially given that US economic growth remains stable, if not strengthening. Recent data on retail sales and positive payroll numbers suggest that the US economy is gaining momentum, even as growth falters elsewhere. Additionally, the ongoing bear market in energy could potentially support US growth in the near term, although it may also exert downward pressure on inflation.
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● House passes spending bill with narrow margin, avoiding government shutdown | Reuters
● Eurozone industrial output growth slows in October | RTT
● In Japan, Abe’s party set to secure victory, but economic challenges persist | WaPo
● China’s industrial output growth continues to decline as slowdown deepens | Bloomberg
● Oil prices close below $60 for the first time since July 2009 | Fortune
● US weekly jobless claims tick down to 294,000 | RTT
US retail spending surged well beyond expectations last month, according to the Census Bureau’s report, which indicated a 0.7% increase in November compared to the previous month. This figure surpasses the 0.4% consensus prediction. On a year-over-year basis, the consumption profile appears even stronger, indicating a robust signal for the holiday shopping season, particularly in light of last week’s impressive November advance in nonfarm payrolls.
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The small-cap premium is among the oldest return anomalies, identified in research literature. However, after decades of scrutiny and mixed outcomes, the notion that shares of smaller companies will outperform those of larger firms faces considerable skepticism.
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● Spending Bill Faces Obstacles, but Congress Aims to Prevent Shutdown | NY Times
● U.S. Budget Deficit Decreases in November | MarketWatch
● Mortgage Applications in the U.S. Rise in Latest Week: MBA | Reuters
● German Inflation Rate Stays At a 4½-Year Low in November | FT
● Italy’s Industrial Output Falls in October, Creating Disappointment Among Recovery Optimists | Reuters
● Investors Sell Stocks as Falling Oil Prices Continue | WSJ
● France’s November Inflation Declines to Its Lowest Level Since 2009 | MNI
US retail sales are projected to show a 0.2% increase in tomorrow’s report for November compared to October, based on The Capital Spectator’s median forecast derived from various econometric estimates. This median prediction indicates a slight slowdown in growth compared to the previous month’s 0.3% rise.
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The recent updates from the financial landscape reflect a mixture of optimism and caution. As we proceed into a new year, the continued analysis of economic trends and indicators will be crucial for informed decision-making in investments and policy directions. Observers will be keenly watching the Fed’s upcoming policies and other global economic developments as they unfold.