Chandler Bond Market Review

Economic Roundup July 2012

Consumer Prices
In May, overall CPI inflation softened to 1.7% from 2.3% in April on a year-over-year basis, driven primarily by a decline in energy prices. The year-over-year Core CPI (CPI less food and energy) increased at a 2.3% rate in May, consistent with the trend in March and April. The core rate remains slightly higher than the Fed’s inflation target of 2%.

Labor Markets
The June employment report showed that the economy added just 80,000 jobs. The report was once again disappointing, and below the consensus forecast of 90,000. The net revisions for April and May were down by 1,000 jobs. The unemployment rate remained unchanged at 8.2%. The employment report has been disappointing for the past four months and suggests that the pace of the economic recovery is slowing.

Retail Sales
In May, retail sales rose 5.3% on a year-over-year basis. Consumer spending has rebounded from the depths of the recession though recent activity has slowed down. Elevated unemployment levels and a recent decline in consumer confidence are likely restraining consumer spending.

Housing Starts
Single-family housing starts rose 3.2% to 516,000 in May compared to 500,000 in April. The housing market remains under pressure, but some data has surprised to the upside this year.

Credit Spreads July 2012Economic Data July 2012

RISKS AND OTHER IMPORTANT CONSIDERATIONS

This report is provided for general information purposes only and should not be construed as specific legal, tax, or financial planning advice. All opinions and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice. This report is not intended to constitute an offer, solicitation, recommendation or advice regarding any securities or investment strategy. This information should not be regarded by recipients as a substitute for the exercise of their own judgment. Fixed income investments are subject to interest, credit, and market risk. Interest rate risk: the value of fixed income investments will decline as interest rates rise. Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low rated bonds generally have to pay higher interest rates to attract investors willing to take on greater risk. Market risk: the bond market in general could decline due to economic conditions,especially during periods of rising interest rates.

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