Last week’s better-than-expected U.S. economic data and firming of oil prices provided more evidence that a recession in the near-term is unlikely, said Scott Anderson, Bank of the West’s chief economist.

“Importantly, U.S. industrial production growth accelerated to an 11.7 percent annualized pace in January, the best annualized rate of growth since May 2010,” Anderson said in a report. “The gain was well beyond Bloomberg analysts’ consensus expectations. Manufacturing comprises only 12.1 percent of the U.S. economy, but it often works as a barometer of overall economic activity and employment. We affirm our above-2 percent real GDP growth forecast for Q1 2016. Signs of stabilization in industrial production are an encouraging signal that the economy isn’t yet hanging over a precipice.”

Anderson said the surprising January data were partly driven by a strong increase in utility output of 5.4 percent due to belated colder winter weather. There also was “a decent monthly improvement in manufacturing output. Manufacturing output accounts for over three-fourths of all industrial production. Mining, which also includes oil drilling, was flat and down 9.8 percent from January 2014.”

“Another comforting data release was the weekly initial jobless claims that unexpectedly fell 7,000 to 262,000 claims, near historical lows,” Anderson wrote. “The less volatile four-week average of new claims decreased to 273,250, the lowest level since December.”

That indicates that employment will continue to grow.

Neal St. Anthony

 

Hormel Foods Corp. leadership receives ‘exemplary’ rating

Morningstar analyst Zain Akbari has raised his fair value estimate of Hormel Foods Corp. to $31 per share after the Austin-based company reported strong first-quarter results. However, with Hormel shares trading at $43 per share, Akbari thinks the stock is currently overpriced.

One of the encouraging things about Hormel in Akbari’s most recent note and a contributor to his increased fair value estimate is that he gave Hormel management an “exemplary” rating for stewardship of shareholder capital. Akbari credits Hormel’s chairman and CEO, Jeffrey Ettinger, who has overseen strong economic returns since he was named CEO in 2006 while making key acquisitions.

“Hormel has captured economic benefits from its purchases while retaining the discipline needed to avoid overpaying,” Akbari wrote. “We are also encouraged that Hormel has learned from other companies’ missteps in acquisitions of natural and organic food manufacturers.”

Patrick Kennedy