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WEEKLY ECONOMIC COMMENTARY
as the October 2011 Beige Book, ater peaking at 38 mentions in theSeptember 2011 Beige Book.
Warm weather almost certainly made an impact on economic activity inthe late winter o 2011 and early spring o 2012, and the economy is nowexperiencing “payback” as weather patterns return to normal.
Rising uel prices, which had been a major concern in the economy andin the Beige Book early this year, as they were in the spring and summero 2011, are now much less o a concern. In most cases, the mentionso “gasoline” or “uel” in the most recent Beige Book were to note thatprices had declined recently and were below year-ago levels.
Supply chain disruptions rom the Japanese earthquake and tsunamiand fooding in Thailand, which were requently mentioned in the BeigeBooks rom mid-2011 through early 2012, have now largely dissipated.On balance, the latest Beige Book depicts an economy that has not changedmuch since the last Beige Book, with words like “growth,” “continued,”“strong,” “demand,” and “increase” dominating both clouds. In short, thedetails o the June 2012 Beige Book do support the idea that some o therecent strength in the economic data may have been weather-related, whichsuggests that we could continue to see “payback” in the orm o soter dataover the remainder o the spring as the weather normalizes. The pace oeconomic growth, job growth, wage infation, and overall prices hinted at inthe Beige Book also support urther policy action rom the Federal Reserve assoon as the June 19 – 20 FOMC meeting.
Fed to Replace “Operation Twist” or Fed to Twist Again
Reports in the nancial media on Thursday, June 7 attributed that day’sbig reversal (rom solid gains in the morning to declines by the end o thesession) in equities to the lack o commitment rom Fed Chairman BenBernanke (in testimony beore the Joint Economic Committee [JEC] oCongress) to another round o quantitative easing. In our view, Bernankedid little to dissuade the market rom thinking the Fed would act on June20, and comments rom the parade o Fed ocials during the week o June4 – 8 also support our view that the Fed will act to replace “Operation Twist”(which ends on June 30, 2012) with some type o monetary stimulus at theconclusion o the June 19 – 20 FOMC meeting.
Net Worth Flowing Back to Households
The Fed’s Flow o Funds data revealed that household net worth (householdassets — including real estate, cars, cash, appliances, mutual unds,pension unds, Treasury notes, other nancial assets, etc. — less householdliabilities — consumer installment debt, mortgages, student loans, etc.) roseto $62.9 trillion by the end o the rst quarter o 2012, up more than $3 trillionrom a year earlier, but still about $4 trillion below the all-time peak hit in mid-2007, beore the real estate collapse and the onset o the Great Recession.A rising stock market, stability in home prices, and debt pay down (both
Household Net Worth Has Increased in Nine o thePast 12 Quarters, but Is Still Below the All-TimeHigh Hit Five Years Ago
Households and Nonprofit Organizations:Net Worth,
NSA, Tril $
In our view, Bernanke did little todissuade the market rom thinkingthe Fed would act on June 20, andcomments rom the parade o Fedocials during the week o June 4 – 8.
Source: Federal Reserve Board, Haver Analytics 06/11/12