NEW$ & VIEW$ (28 FEBRUARY 2014)

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Yellen Sticks to Plan Amid Doubts Federal Reserve head Janet Yellen said bad weather might explain a recent patch of soft economic data, but she isn’t sure—so the Fed’s plan to reduce bond buying will likely continue unless conditions worsen.

“Asset purchases are not on a preset course, so if there’s a significant change in the outlook, certainly we would be open to reconsidering, but I wouldn’t want to jump to conclusions here,” Ms. Yellen said. Earlier in the hearing she said she expected the bond program to be ended by the fall.

Executives Face Weather-Obscured Outlook Amid ‘Winter of a Generation’

Bloomberg economist Richard Yamarone summarizes recent corporate conference calls, also blurred by the weather:

Companies continue to describe underlying macroeconomic conditions as tough and challenging, with most complaining about headwinds of higher transportation costs, currency issues and, where applicable, higher food costs. Colder-than-normal weather is obscuring the outlook because many companies say they aren’t sure the consumer will be willing to return once the storms and seemingly never ending snow piles end.

The CEO Economic Comments Sentiment Index for the week ended Feb. 28 was 49.77, higher than the Feb. 21 reading of 49.74. Sub- 50 readings suggest contractionary conditions, while above-50 is indicative of expansion.

Student NINJAs Pose Growing Threat to Frail U.S.

Commentary by Richard Yamarone, Bloomberg Economist:

Not to be confused with trainee covert agents in feudal Japan, a different type of student ninja is stalking the U.S. economy. So-called NINJA loans extended to
individuals paying for their education with “No Income, No Jobs or Assets” have the potential to be the next subprime crisis. And it doesn’t take much to push this frail
economy underwater. (…)

Today NINJA loans are helping to boost total outstanding debt levels. U.S. household debt increased by $241 billion to $11.52 trillion in the final quarter of 2013, up 2.1 percent from the previous quarter. Education lending rose approximately $53 billion in the quarter. Total household debt increased $180 billion from the fourth quarter of 2012 — student loans accounting for $114 billion of that gain.

Loans to students are essentially the only extension of credit one can get today without a job income, or asset. This form of lending is more disturbing than lending
to would-be homeowners. If a student walks away from a loan, what does the bank get? Because job prospects for newly minted graduates remain bleak — the unemployment rate for those aged 20 to 24 is 11.9 percent — the likelihood of default is elevated. (…)

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Yuan’s Slide Gathers Pace The yuan fell 0.9% against the U.S. dollar to a 10-month low, its biggest slide since China ended a fixed peg to the greenback in 2005.
Renminbi suffers fresh sell-off Heaviest weekly fall in years as traders report heavy PBoC activity
German Retail Sales Climb

Retail sales in January jumped 2.5% from the previous month in adjusted terms, more than erasing December’s upwardly revised 2.1% dip, initial data showed. Sales reached a high not seen since February 2007, and were far better than the 1.0% reading expected from a Wall Street Journal poll of experts. In annual terms, retail sales increased a more modest 0.9%, the data showed, helping to offset a 1.5% decline in December, which was also upwardly revised.


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