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Will a Cold War re-chill economy?

By Mark Hamrick ·
Monday, March 24, 2014
Posted: 6 am ET

We walk through the final days of the first quarter wondering if the economy's pace will accelerate in the coming three months, as many expect. Last week's stock market rally indicates investors are betting that economic indicators will blossom this spring.

Feeling better, thank you

Investors had a slight, short-lived bout of indigestion following last week's meeting of the Federal Reserve. Comments made by Fed Chair Janet Yellen were construed by some as indicating that an interest rate increase could be coming sooner than expected. Stocks fell immediately after Yellen's news conference, then recovered and gained ground.

Despite initial alarm, the annexation of Crimea by Vladimir Putin has not been seen as setting off anything approaching true saber-rattling between Russia and the West. Not yet, anyway. If global events remain in the background, the performance of the economy should guide the markets this week.

What to watch

Among the economic reports on tap for this week:

  • The S&P/Case-Shiller home price index is released, Tuesday at 9 a.m. (all times Eastern)
  • The Conference Board releases the March consumer confidence index, Tuesday at 10 a.m.
  • The Commerce Department releases February new home sales, Tuesday at 10 a.m.
  • The Commerce Department releases a revised estimate of fourth quarter gross domestic product, Thursday at 8:30 a.m.
  • The Commerce Department releases February personal income and spending figures, Friday at 8:30 a.m.
  • The University of Michigan releases consumer sentiment figures, Friday at 9:55 a.m.

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You may love predictable prices, but the Federal Reserve wants a little more inflation. Savers should want that, too.


Russian bear market? Nyet

If there's a more serious flare-up coming out of Ukraine, the risk is that the financial markets could have a more negative reaction than what's been seen so far. But a recent report from IHS Global Insight downplays chances of an escalation.

"It appears that the most likely scenario is one in which Russia maintains control over Crimea but, despite whatever turmoil may ensue, does not seek to introduce a military presence into other regions of Ukraine," say the IHS analysts. "In this case, the Western response will be restricted to diplomatic and limited economic measures."

In other words, the situation is expected to remain contained.

Consumers should thaw

Better-than-expected retail sales reported for February raised hopes the economy is shaking off icicles.

Among those holding an optimistic view is Joel Naroff, president of Naroff Economic Advisors, who thinks the snapback in the coming months will be "huge." That's after the cold dampened everything from car sales to home building across much of the nation.

From an economic standpoint, "winter matters or really brutally cold weather and snow matters," Naroff says. If consumers do spend more and other areas improve, he thinks growth could be as strong as 4.5 percent in the second quarter.

Consensus: A steady outlook

A survey of many of the nation's top economists, released today, finds a more upbeat outlook on the economy. The National Association for Business Economics, or NABE, looks for growth, as measured by the gross domestic product, to rise from 1.9 percent in the first quarter of this year to 3.2 percent in the third quarter of 2015.

As for the job market, the NABE panel expects unemployment to average 6.4 percent this year, down a percentage point from 2013. For 2015, the economists look for the jobless rate to dip to 6.1 percent. Even so, they forecast monthly job creation this year to run slightly below last year's pace, but they anticipate greater numbers of jobs will be added in 2015.

This week in business history

On March 28, 1881, "The Greatest Show On Earth" was born through the merger of the circuses of P.T. Barnum and James A Bailey. Barnum would die a decade later. Early in the 1900s, the Barnum and Bailey show would merge with the Ringling Bros. Circus, which is still touring with several different shows today.

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