The latest batch of economic data from outside of the U.S. depicts a global recovery that is still struggling to gain traction.
In the third quarter, the Eurozone managed to grow at a quarterly rate of 0.2 percent, and a year-over-year rate of 0.8 percent. That was better than expected, and certainly better than the flat second quarter performance, but hardly robust.
And the disinflationary pressure that triggered a global equity correction in mid-September showed no improvement in October, as consumer prices rose just 0.4 percent during the trailing twelve months, and the core rate rose 0.7 percent.
The European Central Bank has signaled its intention to expand its balance sheet further if things don’t improve, and appears headed for a showdown with members opposed to full-blown quantitative easing. The Euro Stoxx 50 index has climbed 3.3 percent in the past month in expectation of additional monetary support, while bond yields have moved lower.
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12,000 Ameriprise Financial Volunteers Turn Out at Nonprofits Across the Country to Help Fight Hunger on Nov. 14
Minneapolis – (Nov. 13, 2014) – For the fifth year in a row, a surge of volunteers from Ameriprise Financial (NYSE: AMP) will turn out at food banks, warehouses and kitchens all over the U.S. to package and prepare meals for families in need. Beginning at 9:00 a.m. EST tomorrow, Friday, Nov. 14, nonprofits across all 50 states will open their doors to Ameriprise employees, advisors and clients who will roll up their sleeves and get to work at more than 500 events. By the end of the day, the company expects to easily exceed its goal of assembling more than 1 million meals for people in communities from coast to coast.
Citing falling energy prices and rising consumer confidence among other factors, energy prices have certainly captured a lot of attention recently. Between late June and early November, the price of West Texas Intermediate (WTI) crude oil fell from $107.00 a barrel to $77.00, a decline of 28 percent. During that time, the national average price of a gallon of regular unleaded gasoline has fallen from $3.66 to $2.93, which is the first time the price has been below $3.00 since 2010. Between mid-June and late-October, the price of natural gas fell from $4.76 per (mmBTUs) to $3.56, a 25 percent decline.
The beneficiaries of these moves are not hard to find. Consumers are saving money every time they fill up. It is estimated that each day consumers are collectively saving $100 million compared to one year ago.
Energy intensive industries are big savers as well, including airlines, truckers and other transports. The country’s retailers are also hopeful that some of these savings will be directed their way during the current holiday shopping season. The National Retail Federation estimates that sales will grow this year by 4.1 percent, compared to last year’s rise of 3.1 percent.
October was yet another month of solid job growth as companies previously operating with very tight labor force levels are compelled to hire at a more rapid pace amid improving demand.
Previously, most businesses had excess capacity available to satisfy new order growth, but with hours worked very high and layoff activity very low, businesses have been getting just about all they can out of their current labor force levels. Simply put, businesses are at the stage where they have to hire or risk losing out on new sales. Improving consumer and businesses confidence levels also clearly help.
We had expected to see a stronger pace of hourly earnings growth by this stage, but we still feel that such gains are pending. Previously in this recovery, there was little reason for businesses to offer higher wages given the substantial slack available in the labor market. Now, with a lot of that slack removed, we believe it is just a matter of time before wages accelerate, assuming net job growth continues as we expect.
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Central banks took center stage last week, and for very different reasons. In the U.S., as expected, the Federal Reserve announced the end of its quantitative easing program, while in Japan, the Bank of Japan (BOJ) surprised markets with a significant expansion of theirs.
Having been well telegraphed, the Fed’s announcement caused barely a ripple in capital markets, while the BOJ’s announcement triggered a strong rally in global equities. Aside from the stark divergence between the two policy initiatives, and the fundamental economic conditions that precipitated them, there was also a divergent reaction to the wisdom of the moves, at least in the case of the BOJ.
In its “Weekend Lex” column, The Financial Times focused on the BOJ’s element of surprise in achieving the desired effect of pushing the yen lower and raising inflation expectations. The central bank’s governor, Mr. Haruhiko Kuroda’s, “… willingness to shock has a certain order, too, if the market now believes he will stop at nothing,” the paper wrote.
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U.S. economic data continues to portray decidedly positive trends. Looking forward, we believe the economy is likely to see a broader and stronger mix of contributing growth factors in the quarters ahead. Although we do not expect today’s report to have a material influence on our GDP forecast, we do believe it provides us with greater confidence in our outlook as the U.S. economy seems to have finally reached a self-sustaining pace.
The Commerce Department’s first estimate of third quarter GDP was moderately ahead of expectations as reported this morning. We were estimating a gain of 3.0 percent, in-line with consensus estimates.
Consumer spending activity was a fraction weaker than expected, but we still believe overall consumer fundamentals are strong and getting stronger. Employment gains have been good, income growth has followed (wages and salaries were a solid 5.1 percent higher in August than they were a year ago) and consumers are working from a much improved financial base after several years of deleveraging. Recent gasoline price declines also should help consumer purchasing power over the near-term, while rising consumer confidence levels suggest consumers are likely more willing to spend.
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MINNEAPOLIS – October 28, 2014 – The Board of Directors of Ameriprise Financial, Inc. (NYSE: AMP) has declared a quarterly cash dividend of $0.58 per common share payable on November 21, 2014 to shareholders of record at the close of business on November 10, 2014.
The recent rise in market volatility has been variously ascribed to concerns over central bank policy, slowing global growth and the approaching elections. The news flow this week will only heighten the debate over the relative importance of each.
The European Central Bank released the findings of its bank stress tests on Sunday, and the results were generally good, unless you happen to be an Italian bank. Of the 130 banks tested, 25 failed, nine of which were Italian. But otherwise, there were few surprises. None of the Eurozone’s major banks failed the test, and for some of those that did, remedial efforts to rectify their capital shortfalls had already been undertaken since the beginning of the year.
Some will insist that the test was not as strict as it could, or should, have been. But it was comprehensive. And the ECB did itself, and everyone else, a big favor by publishing reams of data associated with the exercise, enabling investors to make up their own minds about the relative health of the Eurozone’s banking system.
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