Let’s take a break from the election and the looming fiscal cliff to see what the latest reports say about the U.S. economy.
In September, U.S. consumer credit grew by $11.4 million, above the $10 billion estimate. Meanwhile, August’s reading was revised up to $18.4 billion. Last month, consumers decreased their credit card debt by $2.9 billion—the third decline in four months. Meanwhile, debt for student loans and car loans jumped $14.3 billion. It is clear that the main driver in U.S. debt is student loans, while credit card debt (which is tied to discretionary expenses) is much more manageable for the average American.
The Job Market
Initial claims for unemployment dropped 8,000 to an annual rate of 355,000. This was significantly lower than the 370,000 consensus estimate and was just over the 350,000 benchmark that signals strong job growth. Meanwhile, the four-week moving average ticked up 3,250 to 370,500. There’s no doubt that Sandy played a role in how many people filed for jobless benefits. And analysts predict that the lingering effects of the Superstorm could impact jobless claims for the next few weeks.
In September, the U.S. trade gap narrowed to $41.5 billion—the smallest deficit in nearly two years. This also came in below the $45 billion consensus estimate. At the same time, August’s trade deficit was revised lower to $43.8 billion—down from $44.2 billion. September’s reading was helped by a 3.1% jump in U.S. exports—the largest gain in more than a year. Meanwhile, imports climbed just 1.5%. Following Wednesday’s abysmal market performance, this trade report was somewhat of a bright spot for the U.S.
The Private Sector
Wholesale Inventories advanced 1.1% in September to $494.2 billion—topping the 0.7% consensus estimate. Meanwhile, wholesale inventories for August were upwardly revised from 0.5% to 0.8% growth. Even better news was that sales for wholesalers accelerated to a 2% pace, up from a revised 1% in August. Considering that wholesale inventories account for a third of total business inventories (which will be reported next week), this is a great sign for overall GDP. For the first third-quarter GDP estimate, inventories were a drag on growth, but this faster pace could reverse that effect.
Next Week’s Big Economic Releases
Because the following week will be shortened due to Thanksgiving, next week is going to bring a flood of economic reports. Now that Wall Street has had a chance to digest the Presidential election and earnings season, I believe these reports will be front and center in investors’ minds. They are:
Monday: Retail Sales. The Commerce Department will release this monthly report that measures the total receipts of retail stores. The changes in retail sales are followed closely and are a good indicator of broad consumer spending patterns.
Wednesday: Producer Price Index. The Labor Department will release this monthly index that measures the price of goods at the wholesale level for October. There are three categories within PPI: crude, intermediate and finished. The market tracks the finished goods index most closely, as it represents prices that are ready for sale to the end user.
Wednesday: Business Inventories. The Commerce Department releases its business inventories report for September that includes sales and inventory statistics from all three stages of the manufacturing process (manufacturing, wholesale and retail). The retail inventory number is an important part of this report, and it can move the market. The report also can affect the Gross Domestic Product outlook.
Thursday: Initial Claims for Unemployment. The Labor Department produces this report that details initial jobless applications. The report provides an indicator of the direction of the economy, with increases or decreases in claims that signal slowing or accelerating job growth.
Thursday: Consumer Price Index. The Labor Department will release this important report for October. The Consumer Price Index (CPI) is a measure of the price level of a fixed market basket of goods and services purchased by consumers. CPI is the most widely cited inflation indicator, and it is used to calculate cost-of-living adjustments for government programs and is the basis of COLAs for many private labor agreements, as well. It is the benchmark inflation index and a very important report that can move the market.
Friday: Industrial Production. The Federal Reserve will release its monthly industrial production report for October that measures the physical output of the nation’s factories, mines and utilities. Manufacturing production, the largest component of the total, is derived from using the manufacturing hours worked from the employment report.