US Economic and Market Update 17/6/2014
The FOMC meets today ahead of its key announcements tomorrow. Towards the end of last week we saw import and export data along with Producer Price Index (PPI) figures. Although disappointing for the month on month data the year on year figures continued to imply expansion above recovery. With imports up 0.4% on May 2013 and exports fairing slightly better at 0.5%, analyst forecasts were close to the money. PPI figures showed a reduction in costs over the month of April by -0.2% largely attributed to the first quarter being subjected to the worst weather seen in a long time at the beginning of the year. An increase of 2% over May 2013 was far more acceptable and saw the local markets end out the week in positive territory.
Yesterday, the IMF downgraded the US growth forecast for 2014 from their April forecast of 2.8% to 2% for May. Largely to blame was the rising living costs pared against the lack of rise in wages. The current minimum wage is seen as too low and would see the US employment market back to full strength by 2017 at the current rate. If the minimum wage was increase this would encourage consumer spending thus expand the economy further. It wasn't all bad though as they forecast an expansion of 3% in 2015 and this would see the United States back on track for a developed economy.
No ground breaking news is expected from the Fed on Wednesday as they no doubt will continue to lessen their bond buying and look to confirm some sort of intention to increase rates later in 2015.
What will be of concern is oil costs and what the US government will end up doing in Iraq. They have already confirmed that no action is off the table and it is fair to say that we could see US troops returning to the region should violence escalate further. Crude is already at close to 9 month highs and as the situation in Iraq gets worse it is expected to break $110.00 very soon. This will probably figure in some way in the FOMC speech later tomorrow.
Key Market Data as of 17/6/2014:
Dow: 16,781.01 (+0.03%) S&
Nasdaq: 4,321.11 (+0.24%)
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