Chandler Bond Market Review

Economic Roundup December 2012

Consumer Prices
In October, overall CPI inflation rose to 2.2% on a year-over-year basis from 2.0% in September. The year-over-year Core CPI (CPI less food and energy) remained steady at 2.0% in October. The core inflation rate is in line with the Fed’s inflation target of 2.0%.

Retail Sales
In October, Retail Sales rose 3.8% on a year-over-year basis. On a month-over-month basis, Retail Sales fell 0.3% in September, lower than the consensus forecast of a 0.1% decline. Hurricane Sandy likely had a negative impact on the October sales report. Overall, recent consumer spending trends have been modest, but elevated unemployment levels continue to put pressure on the consumer.

Labor Markets
The November employment report showed that payrolls increased by 146,000 (well above the consensus estimate of 80,000), following a gain of 138,000 in October. Private payrolls advanced 147,000 while government jobs declined by 1,000. Service providing industries showed notable job gains but jobs in the goods-producing sector fell by 22,000. The unemployment rate declined to 7.7% in November from 7.9% in October, but the decline was largely driven by a contraction in the labor force. Overall, the jobs report headline was better than expected but the details of the report were mixed and improvement in the labor market continues to be modest at best. The employment report continues to reflect an overall slow pace of growth in the domestic economy.

Housing Starts
Single-family housing starts were roughly flat in October at 594,000 vs. 595,000 in September (the highest level since August 2008). Recent data suggests that the housing market continues to firm.

Credit Spreads December 2012

Economic Data December 2012


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and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice.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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