3 Stories in the global economy that should not go un-noticed
As tensions over Syria decreased significantly with the U.S. and Russia agreeing on a proposal to eliminate Syria’s chemical weapons arsenal, markets closed out a solid week boosted by the diplomatic solution and hopes that a big tapering move by the Fed may be avoided.
For the week, the S&P 500 gained 1.98%, the Dow rose 3.04%, and the Nasdaq grew 1.70%.
Here are the 3 stories this week that rose above the noise:
Fed’s Taper Should Start Small
In a recent article, PIMCO’s Mohamed El-Erian provides his views on how the Federal Reserve is likely to exit from quantitative easing programs. In El-Erian’s opinion the process will begin this week with the announcement of a small reduction in asset purchases.
However, the article also provides some compelling reasons why the Fed’s process of winding down its unconventional programs might be a multi-year endeavor with the Fed looking to minimize any negative impact on financial markets. The entire article provides a nice summary of how Fed policy is likely to evolve in the coming months.
China’s Industrial Production Output Rises 10.4% in August
The world economy received some good news last week as China’s industrial output grew at the fastest pace in 17 months as the recovery in the world’s second largest economy gains traction. Factory production rose 10.4 percent from a year earlier, topping all 45 analyst estimates whose projections ranged from 9.2 percent to 10.2 percent.
Separately, UBS AG said China’s liquidity and credit squeeze appears over. Further positive economic news out of China included a 13.4 percent increase in retail sales, while fixed asset investment increased 20.3 percent in the January-August period, both topping estimates.
Manufacturing Rebound Led by Autos Supports U.S. Growth
U.S. industrial production increased in August by 0.4 percent, which is the fastest growth in six months. The acceleration in industrial production was led by a strong increase in auto and housing-related output. The strong industrial production data comes on the heels of impressive Institute for Supply Management manufacturing data in July and August and may set the stage for an acceleration of GDP growth in the third quarter.
According to Deutsche Bank Economist Brett Ryan, “manufacturing should be a pretty decent contributor to growth over the second half of the year. You have an elevated level of unfilled orders, so that bodes well for production.”
Articles chosen and summarized by the First Allied Asset Management, Inc. investment management team.
