Economic Indicators Dashboard – July 2016 – Brexit? So last month!

August 30, 2016 Categories: Economic Insights

The July reading of the Economic Indicators Dashboard reflects that the markets shrugged off near-term concerns regarding the economic impact of Brexit: market volatility was back on the low end of its historically typical range and U.S. markets (Russell 3000® Index) continued to climb in July. We believe that a combination of favorable employment conditions, emerging wage pressures and continued U.S. economic growth may lead the Federal Reserve to raise interest rates this year. We believe this is more likely to come in December than in September.

Let’s look at some of the recent Economic Indicator Dashboard metrics in closer detail:

Economic Dashboard July 2016

Accessed on Monday, August 22, 2016.

This dashboard is intended as a tool to set context and perspective when evaluating the current state of the economy.
For each indicator, the horizontal bar shows four things.

  • A blue color band represents the typical range for this indicator. +/- 1 standard deviation of historical values for the indicator fall in this range.
  • An orange marker shows the most recent value – the closer the marker is to the blue bar, the closer it is to historically typical conditions.
  • A grey area outside of the blue band which shows the range actual conditions.
  • An arrow shows the most recent three-month trend indicating if it is moving toward or away from the typical range

Unemployment continued to improve: following a solid June, an additional 255,000 new nonfarm payroll jobs were created in July, bringing the unemployment rate down to 4.9% by the end of the month. Further sign of labor market health came in the form of wage inflation, which is slowly picking up. The employment cost index (ECI), a quarterly economic series detailing the changes in the costs of labor for businesses in the U.S. economy, increased 0.6% for the second quarter.

The U.S. economy, measured by GDP, expanded at a seasonally adjusted annual rate of 1.2% in the second quarter, below consensus expectations of 2.6%. While disappointing, it wasn’t a disaster. Much of the slowdown could be attributed to built-up inventories, reduced business spending, and a lower than expected level of government spending. The forces that have held GDP and earnings low recently – a strong dollar and concern in the energy sector – have been diminishing, leading Russell Investments to expect modest, reasonable strong economic growth going forward.

Inflation continues to remain low, driven by low energy prices, specifically gasoline prices. The weak energy prices and muted inflation expectations flattened the yield curve, moving the 10-year Treasury down to 1.45% – a level not seen since the summer of 2012 (1.43% on July 25, 2012).

Home prices recently suffered a slight decline – but that is likely to be temporary. A recent survey of members of the National Association of Home Builders, suggests an expectation that sales of single family homes will increase over the six months. If that comes to pass, then the longer-term trend of home prices is still a stable upward march.

The bottom line

Solid economic growth in the U.S., continued rising employment, and early signs of wage pressure may put an increase in interest rates back onto the Federal Reserve’s agenda before the end of the calendar year, provided global market volatility doesn’t spike.

Disclosures:

These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.

This material is not an offer, solicitation or recommendation to purchase any security.

Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.

Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type.

Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.

The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.

The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.

Russell Investments’ ownership is composed of a majority stake held by funds managed by TA Associates with minority stakes held by funds managed by Reverence Capital Partners and Russell Investments’ management.

Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the “FTSE RUSSELL” brand.

The Russell logo is a trademark and service mark of Russell Investments.

Copyright © Russell Investments 2016. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an “as is” basis without warranty.

Russell Investments Financial Services, LLC, member FINRA (www.finra.org), part of Russell Investments.

RFS: 17787

  1. No comments yet.

Millennials are the future.
Engage them now.

Millennial InvestorSubscribe to the Helping Advisors Blog and receive a free copy of the Millennial Investor.

We will only use your email for Helping Advisors Blog updates.