On Wednesday Federal Reserve Chairman Ben Bernanke gave his testimony before the House Financial Services Committee arguing for the central bank to retain supervision of smaller banks and large financial institutions. Chairman Volcker stated that gaps occurred with the system and financial regulations are needed to close those gaps. These gaps included unregulated securities overlapping with regulated securities.
February Consumer Price Index (CPI)
The consumer price index is a cost-of-living inflationary indicator measuring various products and services including housing, energy, food, and transportation. Month-on-month CPI fell to 0.0% from January’s 0.2% and year-on-year CPI fell to 2.2% from 2.7% last month.
The CPI index gives the Fed reason to keep interest rates low for the foreseeable future as inflationary pressures is subdued.
February Leading Indicators
Leading Indicators increased to only 0.1% compared to January’s 0.3%. The 3-month moving average decreased to 0.53% growth compared to last month’s 0.86%.
Leading indicators is a composite of ten economic indicators including production workweek, money supply, inventory changes, stock prices, unemployment insurance claims to generate an overview of the economic activity. Regardless of strength within the manufacturing sector, some of these other indicators are showing weakness in the overall economy.
March
March Philly Fed reported an increase of 18.9 in manufacturing activity compared to February’s 17.6. The Philly Fed is a good indicator for the industrial production index. Next month’s industrial production should increase just as February Industrial Production increased to 0.1% following 0.9% in January. On Monday March 15th March Empire State Manufacturing Survey fell 22.86 from February’s 24.91 however it is above the consensus of 22.0. These numbers are indicating that the manufacturing sector seems to be stabilizing as the economy is recovering.
Manufacturing is a major sector of the economy and gives insight into commodity prices. By understanding the type of investments the manufacturing sector is seeking, commodity prices will follow the direction as well as inflationary pressures.
If the manufacturing sector is seeking steel and other raw materials then the index will increase and so will the prices of these commodities as well as inflation.
Weekly Jobless Claims
Jobless claims totaled 457,000 for the week of March 13th falling 5,000 from 462,000 last week. The 4-week moving average fell to 471,250 from 475,500 from last week.
The 4-week moving average gives a better perspective on the jobless claims trend.
A lower jobless claims number means a stronger job market and a healthier economy. Vice versa – a higher jobless claims number means a weaker job market and a declining economy.
On Wednesday the U.S Senate voted approved first election-year job-creation bill.
The bill is a $17.5 billion payroll tax credit for employers hiring unemployed Americans. The employer will receive 6.2% federal payroll taxes as well as another $1,000 tax credit if the employee stays on in a year.
Whether jobless claims improve expect to be seen with Wednesday’s job-creation bill.
Mid-term elections are coming and Congress will most likely get every piece of positive legislation passed to maintain their own seats.
Weekly Natural Gas Report
Natural gas supplies fell 11 billion cubic feet for the week of March 12th. Natural gas futures declined 4% after the government reported supplies fell 11 billion cubic feet than the previous week. Slow economic activity usually would lower the demand for natural gas.
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