With all of this talk about earnings season, it’s easy to let other important news fall by the wayside. Take the reports that were just released on the U.S. economy, for example. Today, Wall Street is so fixated on Wells Fargo‘s (WFC) earnings announcement and Boeing’s 787 Dreamliner woes that few have noted today’s shocking trade report: Excluding petroleum transactions, the trade gap has widened to the highest level in five years! This will have real implications on fourth-quarter economic growth, as will three other figures we received this week. That being said, let’s take a breather from earnings to refocus on the U.S. economy:
1. Consumer Credit
As I mentioned yesterday, consumer credit rose by $16 billion in November. This was more than double the median forecast, which called for an $8 billion hike in consumer credit. And the bulk of the increase—$15.2 billion—was thanks to a surge in non-revolving debt, especially student loans. This is the fourth consecutive month that consumer credit has risen, a good sign for consumer confidence. I expect that we’ll see consumer credit continue to rise through December. However, once we start getting post-holiday shopping season data, we could see a drop-off in credit card debt.
2. Jobless Claims
The Labor Department announced that jobless claims rose by 4,000 to 371,000 in the latest week; this was above the 365,000 consensus estimate. Meanwhile, the closely-watched four-week moving average rose by 6,750 to 365,750. Typically, the U.S. economy creates payroll jobs when initial claims fall under 400,000. So the fact that weekly jobless claims have been creeping upwards may be a sign that new payroll job growth is slowing.
3. Wholesale Inventories
In November, wholesalers increased their stockpiles by 0.6%, blowing past economists’ estimates of 0.2% growth. Meanwhile, October inventories were revised downward from 0.6% to 0.3%. In November, wholesalers started stockpiling more in response to a 2.3% surge in sales—the highest jump since March 2011. This growth is largely thanks to a post-Sandy surge in car buying: Auto sales advanced 2.8% in November. Considering that wholesale inventories make up nearly a third of business stockpiles, this is great news. I’ll be looking forward to next Tuesday’s business inventories report to get a better sense of how this will impact fourth-quarter GDP.
4. U.S. Trade Report
Today, the Commerce Department announced that the U.S. trade deficit surged 15.8% to $48.73 billion in November, up from a revised $42.06 billion in October. The consensus estimate completely missed the mark; economists had expected the gap to widen to just $45 billion thanks to lower gas prices. In November, the trade gap widened thanks to a 3.6% jump in imports, especially in consumer goods like electronics and pharmaceuticals. Meanwhile, exports advanced 1%. This was a big surprise to most economists. Unfortunately, because a higher trade deficit naturally subtracts from GDP growth, we’ll probably see reduced fourth-quarter GDP estimates.
Looking Ahead to Next Week
While this week was a little lighter on the economic news, next week we’ll see nothing less than a flood of new economic data:
- On Tuesday, we receive the latest retail sales data and wholesale prices (PPI) for December, and as I mentioned earlier, the November Business Inventories report.
- On Wednesday, we get a feel for current inflation through the December Consumer Price Index and the Federal Reserve reports on the state of manufacturing through its Industrial Production Report.
- On Thursday, the weekly Initial Claims for Unemployment will come in as usual and we’ll finish out the week with the Housing Starts and Building Permits reports from the Commerce Department.
On top of this, we’ll see fourth-quarter earnings season really start to pick up, with announcements from bellwethers like Morgan Stanley (MS), eBay Inc. (EBAY), Bank of America Corp. (BAC), American Express Co. (AXP) and Intel Corp. (INTC). As always, I’ll keep my eyes on the newswires and report my observations in this daily blog.
In the meantime, enjoy your weekend—I’ll be back first thing on Monday morning.