- Fed, employment data, tweets from Trump
The first week of the New Year in the United States had a busy economic agenda. The Fed's minutes and employment data were closely watched, while tweets of the president-elect of the country, Donald Trump, also moved the markets.
The Federal Open Market Committee (FOMC) minutes, published Wednesday, indicated that the new administration's expansionary fiscal policies could cause interest rates to rise faster than anticipated.
"Many participants noted that there was currently substantial uncertainty about the size, composition and timing of prospective fiscal policy changes, but they also commented that a more expansionary fiscal policy might raise aggregate demand above sustainable levels, potentially necessitating somewhat tighter monetary policy than currently anticipated," the minutes read.
In addition on Friday, three Fed officials signaled that the bank could be more "hawkish" in 2017 compared to the last two years. Among the bank's most "dovish" members, Chicago Fed President Charles Evans surprised the markets by saying that it is not implausible to raise interest rates three times this year. Richmond Fed President Jeffrey Lacker said the bank may have to raise interest rates this year faster than market expectations. In addition, Cleveland Fed Chairman Mester said she wants to see more than three rate hikes this year.
- Obama’s last employment report
Among the many data released during the week, December employment report was prominent.
According to official figures released on Friday, non-farm employment rose 156K in December, below expectations of 175K. Meanwhile, the unemployment rate rose to 4.7 percent, in line with expectations.
The average hourly wages increased by 0.4 percent month-on-month in December. The wage increase, which reached 2.9 percent on an annual basis, recorded its highest level since 2009. The Fed is closely monitoring wages for signs of inflation.
All in all, the last full employment report of Obama’s Presidency suggested that the job market is near full employment.
According to another report released in the country, factory orders have declined 2.4 percent in November, ending a four-month rise. Foreign trade deficit increased by 6.6 percent in the same period and reached its highest level in the last nine months.
In addition, the ISM Manufacturing Indices in the U.S. rose to 54.7 in December, showing that the industrial sector recorded its fastest growth in two years. The non-manufacturing ISM index remained stable at 57.2, maintaining its highest level in the past 14 months. The service sector PMI index in the country fell to 53.9 in December, in line with expectations.
- Trump's Tweets
Among other developments this week were Trump's attempts to prevent General Motors (GM) and Toyota from building factories in Mexico. Trump, who previously criticized U.S. defense giants Lockheed Martin and Boeing for the cost of the aircraft they manufactured, called on the two automotive giants to build in the U.S. or “pay big border tax".
The shares of GM and Toyota that traded on the New York stock market suffered losses after Trump's tweets.
Ford announced it was planning to cancel a $1.6 billion investment in Mexico after Trump's GM scare. The company has announced that instead of Mexico, it will invest $700 million in Michigan to create 700 new jobs.
- Fed officials to be monitored in the new week
This week, statements by Fed officials, especially Janet Yellen, will lead the economic agenda.
Yellen will meet with educators from different parts of the country at a conference in Washington on Thursday.
Other names expected to speak include Boston Fed President Eric Rosengren, Atlanta Fed President Dennis Lockhart, Philadelphia Fed President Patrick Harker, Louis Fed President James Bullard and Chicago Fed President Charles Evans.
In addition, retail sales, producer price index, wholesale inventories, JOLTS Open Jobs and consumer credits are among the data that will be released this week.