The Banking and Strategy Initiative

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US Economy 2013: January all but forgotten, Industrial production still seems positive.

A late catch up with the meanderings of the US Business Economy’s recovery is due as February’s near washout was saved by early PMI reports and the continuing improvement in Service PMIs. The housing data’s big jump in January was necessarily followed by a subdued February but the only good thing coming out of a 0.2% jump in PPI and the downturn in Oil was almost shining through in jumping inventories this week while (chain) store sales were still up 1% without further improvement in Auto sales since the numbers were not as damaging as expected in late 2012. Oil had to trend down after a spike in December and January as consumption by aware Americans apparently nipped the Oil prices in the bud again with reduced consumption last couple of weeks.

The US ISM data printed a better 54.3 for February and the flash for March will make it clear if the redefinition of the recovery brought down by the Q4 GDP announcement was still a little premature. Republicans are again headed for a compromise with larger defense spending cuts shared in the plans last week and the Trade data has been holding up despite the increase in Trade deficit in February in Thursday’s report with a $17B Monthly Services Surplus and a Goods deficit nearing its highest but supported by changing data in Capital goods exports and imports pointing to an upturn  in the Global Economy.The situation in Japan and Europe is especially more optimistic but Europe’s own Production and inflation data is still pointed to a certain extension of deflationary conditions into 2013 and probably beyond. Inflation jump to 0.7% for the last week is unlikely to sustain itself as Y/Y numbers remain stuck at 2%

China’s rally in equities came to a final halt in the last month too and PMI dropped still staying barely above 50 while property prices seem caught up in a regional bubble from city to city hampering the new President’s plans to move growth inward, to rural areas. However the US and India seem set on riding 2013 at the top of its spirits as markets open to a likely 9th day of a positive closing for the S&P 500 in the US this Friday.

Auto sales remain a bigger risk but as Friday’s Job report and the earlier Chicago PMI print of 56 showed, the recovery could start deepening sooner than expected according to the current mood in businesses in the Midwest. Housing Prices also continue their recovery with Existing and New Sales maintaining their year on year growth and a tight all time low of barely four months in inventory.



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