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March
31
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Week In Review

Brexit

On Tuesday, British EU Ambassador Tim Barrow triggered Article 50 of the Lisbon Treaty by delivering formal notice of the U.K.’s intention to leave the European Union to European Council President Donald Tusk.

Our Take

Now the real work begins. The U.K. has two years to negotiate with the EU over their future relationship. The direction that those discussions proceed will determine the impact of the U.K. departure, and the consequences are far from certain. Indeed, unintended consequences have already arisen as Scotland, who voted overwhelmingly to remain in the EU, is already discussing a referendum to declare independence from the U.K. Headlines surrounding this saga are likely to continue for the foreseeable future.


Personal Income and Consumption

Personal income rose 0.4% in February while consumption rose 0.1%

Our Take

Consumption increases have not kept pace with income gains in recent months. This could indicate cautious consumers opting for increased savings or pent up demand soon to be unleashed. Given the current economic calm, it is more likely that consumption gains steam in the second quarter.


Municipals

Moody’s Investors Service lowered New Jersey’s credit rating from A2 to A3 this week. Moody’s cited significant pension underfunding and weak fund balances as reasons for the downgrade. This week’s downgrade is the 11th time that ratings agencies have lowered the credit rating on the state since Chris Christie took office.

Our Take

New Jersey’s pension liabilities have been a problem for the state for years. Reasons for the 9th and 10th downgrades in 2015 and 2016 included pension underfunding and structural deficits. Under Christie’s current budget proposal, New Jersey is scheduled to make only half of the state’s full contribution amount next year. The weight of the unfunded liabilities continues to affect the fiscal health of the state.