Economic Update 12/16/13

“MINI-BARGAIN” PASSES HOUSE, HEADS FOR SENATE

Last week, the congressional budget committee headed by Rep. Paul Ryan (R-WI) and Sen. Patty Murray (D-WA) succeeded where its 2011 predecessor had failed – it reached a deal, albeit a small-scale one. The House passed its budget bill by a 332-94 vote Thursday night; the legislation heads for the Senate this week. If made law, it will reduce the federal deficit by $23 billion during the next 10 years while halving 2014 sequestration cuts to defense spending and non-defense discretionary spending. (Other scheduled cuts in mandatory federal spending will proceed.) This deal doesn’t raise taxes, and it doesn’t extend unemployment insurance, which could expire on December 28 for 1.3 million Americans. Federal spending would increase by $45 billion next year as a result of the agreement.

FALL BRINGS BETTER RETAIL SALES

The 0.7% November gain was the biggest recorded by the Commerce Department in five months and brought the year-over-year improvement to 4.7%. Minus auto sales, the gain was still 0.4%. October’s retail sales gain was revised up to 0.6%.

PRODUCER PRICES RETREAT AGAIN

The Producer Price Index declined 0.1% in November following its 0.2% dip for October. Economists polled by Bloomberg thought the headline PPI would be flat for November, instead of retreating for a third consecutive month. November did bring a 0.1% rise in the core PPI.

ROUGH SLEDDING FOR STOCKS SO FAR IN DECEMBER

Signals of an improving economy also brought worries about a December taper by the Federal Reserve. As a consequence, the S&P 500 (-1.65% to 1,775.32), NASDAQ (-1.51% to 4,000.98) and Dow (-1.65% to 15,755.36) all staged 5-day retreats.

THIS WEEK: Monday brings the Federal Reserve’s report on November industrial output; also, Ben Bernanke speaks briefly at the Fed’s Centennial Commemoration. Tuesday, the November CPI comes out along with the December NAHB Housing Market Index. On Wednesday, financial markets around the world will be waiting for the Fed’s latest policy statement; reports on November building permits and September, October and November housing starts will arrive from the Census Bureau. Thursday, NAR puts out its existing home sales report for November, the Conference Board issues its November leading indicator index and new initial jobless claims figures appear; Nike, ConAgra Foods and Pier 1 offer earnings news. Friday, the Bureau of Economic Analysis makes its final estimate of Q3 GDP.