U.S. economic releases were mixed. In the U.S., housing data was weaker, but the Flash PMI and Initial Jobless Claims were better. The cold weather and snow may have obscured a true picture of the U.S. economy; more time will be necessary to assess economic activity. The European flash PMIs remained in the expansion zone. Equity and bond markets were mixed on the week. Yet, credit spreads narrowed, meaning that investors demanded less additional yield to assume credit risk than a week ago. The U.S. dollar rose against the Yen, Pound and Looney, but gave ground to the Euro. Metals and energy commodity prices were higher on the week.

Perspective:

This weekend we attended the 27th annual Camden Conference, The Global Politics of Food and Water. (click on the title to see the program) This was the first conference where the remote sites (the Strand and the Hutchinson Center) as well as the Camden Opera House were sold out. Attendees were not disappointed. Globally recognized speakers from academia, government and industry identified both the challenges and potential solutions necessary to sustain the planet and feed its people. I recommend returning to the Camden Conference web site in a week or two when the videos of the conference speakers will be posted.

Several of the speakers developed the analogy of the earth as a human body that receives and restores nutrients and water as "calories" that are later available to burn. They refer to the post-caloric phase as the challenge of feeding the population when the earth burns more "calories" than are being restored.

For my wife and I, the Camden Conference is a time when friends from near and far away get together to discuss a global issue of foreign policy. During this weekend, we consumed many "calories," but returned home after the weekend with with more "calories" of friendship and knowledge restored in our bodies for many years to come.

Economic Releases:

U.S. Housing was impacted by weather in January. Other factors, such as rising mortgage rates or overall slowing of the economy, may have also been a factor; the extent of weather attribution will need to await several months for post-winter reports. Existing Home Sales (green in the chart) fell 5% to 4.662 million, the lowest number of Sales in more than a year and near the low end of the range of expectations. The median price of Existing Homes fell 4.5% to $188,900. Similarly, Housing Starts (red in the chart) and Permits (blue in the chart) fell in January; both numbers were also on the low end of the range of expectations for January. Not shown below, the National Association of Home Builders Housing Market Index for February fell 10 points to 46, well below the range of expectations.

Other Economic Releases

In spite of a 1% rebound in Food, PPI rose only +0.2% in January; less food, energy, and trade services PPI rose only a tick; the year-over-year report was a 1.2% increase in PPI. Similarly, CPI rose only a tick in January and 1.6% YOY; the Core (less food and energy) rates matched the headline numbers. The lack of signs of inflationary pressure in either CPI or PPI should give the Fed room to accommodate. On the positive side for growth, the flash Markit report for Manufacturing PMI rose 3 points to 56.7, well into the expansion zone. Also on the positive side, Initial Claims for Unemployment eased to 336,000, as expected, in the week of Feb. 15.

The European Union Flash Reports for Services, Manufacturing and Composite for February were lower at 52.7, 53.0, and 51.7, but remained above 50, the demarcation between expansion and contraction. Germany's Markit PMI's increased for Services, 55.4, and Composite, 56.1, but dropped for Manufacturing, 54.7. Germany's Zew Surveys for Current Conditions rose, but for Business Expectations fell in February. France's Flash PMI's slipped further into the contraction zone. The UK's Unemployment Rate ticked up to 7.2% and the Retail Sales fell -1.5% fell in January. UK's inflationary pressures also remained well contained; CPI fell -0.6% and PPI for Output rose +0.3% while PPI for Input fell -0.9%.

China's Flash PMI for Manufacturing slipped to 48.3 in February, a point below expectations. Japan's Central Bank met and left its monetary policies unchanged.

Equities Markets:

Equity markets were mixed on the week, but corporate bond markets generated positive returns through the benefit of narrowing credit spreads.

Bond Markets:

Government Bond market yields were little changed the week ending Feb. 21. Credit spreads fell, especially for the riskier asset classes.

Currencies & Commodities:

The U.S. dollar rose against the Yen, Pound and Looney, but fell against the Euro this week. Commodity prices for energy and metals rose, especially for natural gas due to the cold spells sweeping through the US.