Chandler Bond Market Review

Economic Roundup March 2014

Consumer Prices

In January, overall CPI inflation rose to 1.6% on a year-over-year basis from 1.5% in December. The year-over-year Core CPI (CPI less food and energy) declined to 1.6% in January from 1.7% in December. 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 January, Retail Sales rose 2.6% on a year-over-year basis versus up 3.6% in December. On a month-over-month basis, Retail Sales excluding autos and gas fell 0.2% in January which was below the consensus forecast of +0.2%. Adverse weather likely hindered retail sales during the month.

Labor Market

The February employment report was stronger than expected as payrolls rose by 175,000 versus the 150,000 consensus estimate. Net revisions for job growth in January and December were +25,000. Private payrolls increased by 162,000 in February and government jobs increased by 13,000. Although payrolls were stronger than expected in February, the unemployment rate rose to 6.7% from 6.6% in January, driven by new entrants to the labor force.

Housing Starts

Single-family housing starts fell 16.0% in January after falling 4.0% in December. Unfavorable weather may have been at least partially to blame for the declines.

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and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice.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