Chandler Bond Market Review

Economic Roundup January 2013

Consumer Prices

In November, overall CPI inflation rose slightly to 1.2% on a year-over-year basis from 1.0% in October. The year-over-year Core CPI (CPI less food and energy) was unchanged at 1.7%. The core inflation rate is still trending below the Fed’s long-term goal of 2.0% and remains below the trigger rate for policy action of 2.5%.

Retail Sales

In November, Retail Sales rose 4.7% on a year-over-year basis up from 4.1% in October. On a month-over-month basis, Retail Sales rose 0.7% in November, which exceeded the consensus forecast.

Labor Markets

The December employment report was weaker than expected as payrolls rose by just 74,000 versus the 200,000 consensus estimate. Unfavorable weather may have been a contributing factor. The unemployment rate declined to 6.7% from 7.0%, but the decline was largely driven by a drop in the labor participation rate. Net revisions for job growth in October and November were +38,000. Average nonfarm payroll growth during the fourth quarter 2013 was about 172,000 per month. Private payrolls increased by 87,000 in December while government jobs contracted by 13,000.

Housing Starts

Single-family housing starts jumped 20.8% in November after rising 3.8% in October. Housing starts have recently regained some momentum.

Economic Roundup January 2014

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and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice.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