Monthly Economic Update February 2016
Flat to slightly down stock markets in February were a welcome respite following meaningful declines in January. The seemingly benign month-end results, however, said nothing of the early month downturn or the impressive month-end rally to achieve them.
Throughout the month, investors were faced with conflicting, and in some cases, indeterminate data. Payroll growth slowed in January, yet wage gains accelerated and consumer spending was healthy. The Institute for Supply Management’s manufacturing index suggested contraction, but durable goods orders, industrial production, and capacity utilization all advanced. Inflation expectations declined while actual observed inflation spiked upward. GDP growth for the final quarter of 2015 was revised upward, but an unsustainable inventory adjustment was a key factor. Lastly, the overall housing market continues to show volume and price gains, but the new home market has been constrained by construction headwinds.
By mid-month, a crescendo of investor pessimism collided with a dovish Federal Reserve to drive stock markets and other risk assets higher.
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