Some strength, some weakness on the economic front

This post was originally published in the Washington Business Journal’s WBJBizBeat Blog. | Washington Business Journal

Last week after a summit in Brussels, EU leaders declared a turning point in the Greece fueled Euro debt crisis. Leaders pledged to shift their focus away from budget cutting and onto pro-growth projects.

Here at home, last week was the twenty-second consecutive week of improvement in economic numbers including:
Unemployment claims– the labor market showed signs of improvement with applications for unemployment falling to 351,000, a four year low.

Income gains– in the 2nd half of 2011 were stronger than previously reported. After tax income, adjusted for inflation, increased at a 1.4% annual rate in the fourth quarter 2011.

Manufacturing– Chicago PMI surged to 64 in February, up from 60.2 in Jan. The production, orders, and employment components all posted good gains.

Existing home sales– rose 2% in Jan and climbed at a 10.3 annual rate.

Consumer confidence –rose more than forecast to 70.8, up from a revised 61.5 in January. A decline in layoffs, larger payroll growth and the recent stock market rally seem to be putting smiles on consumers’ faces.

4th Quarter real GDP was revised up to 3% from an initial estimate of 2.8%. The revision was modest and mostly expected. This growth rate is the highest since the 2nd Quarter 2010.

The Not So Good News:
The S&P/Case-Shiller index of home prices in 20 cities — fell at a 4% annual rate in December, up from a 3.9% prior rate. Distressed properties returning to the market mean prices may stay depressed, prompting buyers to continue to be patient as they look for bargains and new construction coming on line.

U.S. durable goods—following a 3.2% increase reported in December, January orders fell (more than forecast) by 4%. The 2011 expiration of a tax incentive allowing full depreciation on equipment purchases may have prompted a slowdown in investment at the beginning of 2012.

The Markets:
The equities market was fairly quiet last week with the real action in oil and gold. S&P was up .3%, the Dow crossed 13,000 and closed at 12,977, unchanged for the week. Gold prices fell $65 to $1,709. Oil rose $3 to $106.70. The 10yr Treasury continues to hover around 2% at 1.97%.

Rising oil prices and continued economic improvements continue to drive gas prices higher. The nationwide average price for a gallon of regular unleaded gas rose for the twenty-sixth day in a row to $3.76, up from $3.47 a month ago and $3.49 a year ago.

Municipal bond issuance has picked up over the past few weeks. It is interesting to compare two of the larger state general obligation issues of the past few weeks. Last week California (A1/A- rated) sold a $2 billion new issue which was well received. The 10yr bonds sold at 2.78%. This week the State of Maryland will sell nearly $1 billion of Aaa/AAA rated general obligation bonds at an anticipated yield of 1.9%. Maryland has historically been able to borrow at the lowest cost of any state in the US. They will not disappoint with this issue.

This week we will be watching Friday’s all important employment report.