Bank of America Merrill Lynch Top 10 Themes

The 10 major economic themes of the past week from Bank of America Merrill Lynch, with some highlights below: 1) Message from the FOMC: not so fast :The FOMC minutes revealed a cautious FOMC and were dovish relative to expectations. It seems that the FOMC choose to keep the language because of concerns it would be misinterpreted as a signal of a shift in policy, which could prompt an “unintended tightening of financial conditions.” This likely reflects the scars from the taper tantrum last summer when Fed officials hinted at tapering QE. 2) Good things come in small packages:The growth of bank lending to US small enterprises starkly contrasts with contraction in credit in Europe and tightening conditions in China. This supports our long positions in both the US dollar and the US equity market. 3) Strong inventories, weak sales 4) Claims inch lower: Initial jobless claims for the week ending October 4 inched down to 287,000 from 288,000 in the prior week (revised up from 287,000). This was better than market expectations of 295,000 and our forecast of 290,000 5) Subprime speed limit? :We see the rise in subprime auto lending as something that bears watching, but not an imminent risk 6) LMCI lends context to labor market conditions 7) Credit crunch; Consumer credit expanded by a modest $13.5bn in August, well below expectations of $20bn and down from a downwardly revised $21.6bn in July (from $26.0bn initially). This is the lowest pace of expansion since November 2013. 8) Anatomy of a growth scare 9) CoreLogic August Home Prices: 6.4% YOY, 4.2% MOM 10) 3Q14 preview: Expect a beat despite the headwind: But two headwinds to EPS: lower oil and stronger dollar