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Investing Specialists

IMF Finally Sees Slowing Growth Just as Other Signs Turn Positive

Many world-growth indicators have looked better recently; meanwhile, the IMF checks in with yet another reduction in its 2016 forecast.

It was a good week for equity and commodity markets around the world. Weekly equity returns ranged from a low of 1.6% for the U.S. S&P 500 to a robust 3.6% for Europe. Commodities fell in the middle of that range at 2.26%, as investors await results of an oil producers' conference this weekend. More signs that U.S. production was finally being reined in also helped along commodities. Better economic news from China, especially from the housing and industrial sectors, provided an additional lift to the commodities sector. Equity markets were also helped along by better-than-expected earnings from some of the big U.S. banks, although the bar had been seen as unusually low for that group. U.S. economic news, at least on a headline basis, was modestly disappointing. Interest rates were little changed on the week, as the U.S. 10-year Treasury increased from 1.72% to 1.75%.

U.S. economic data seemed uniformly disappointing on a headline basis this week, with retail sales and industrial production coming in short of forecasts, as did headline inflation--all indicating potential weakness. We continue to believe that oscillating inflation and faulty seasonal factors are largely to blame and that year-over-year data remains indicative of an incredibly steady economy. A 1.1% decline in clothing prices and a 0.5% decline in food prices pummeled headline retail sales. We rate these as positives and not negatives. The retail sales report is not adjusted for these price declines. Year-over-year retail sales growth remained at 4%, the same as its 12-month average. Hardly a time to be sounding the alarm on consumer spending, as many did this week.