It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let’ss take a look at this week’ss big headlines:
Consumer Credit Report
In July, consumer credit surged $26.01 billion, or by 7.4%, to $3.24 trillion. Economists were calling for a $17 billion increase, so this was a much larger jump than expected. Meanwhile, June consumer credit was revised higher to reflect an $18.81 billion increase, up from a $17.26 billion gain previously. Digging into the details of the July report, non-revolving debt (which covers auto and student loans) accounted for the lion’s share of the increase, rising $20.65 billion. This represents the fastest growth rate in consumer credit since April. While we don’t want to see consumers spend above their means, the bright side of rising credit is that it indicates a more confident American consumer. Consumer spending accounts for more than two-thirds of the U.S. economy, so this bodes well for third-quarter GDP.
In July, wholesale inventories ticked up 0.1%, below economists’ expectations of a 0.4% increase. Excluding automobile stockpiles, core wholesale inventories were flat for the month. Stocks of farm products, chemicals, professional equipment and petroleum trended lower. Meanwhile, auto inventories rose 1.0% in July, following a 0.2% dip in June. The headline results for June were also revised lower to reflect a 0.2% gain, down from a 0.3% increase earlier.Contrary to the consumer credit report, this could weigh on third-quarter GDP. However, whenever companies decide to keep inventories tight, this is usually followed by a period of growth as businesses restock their shelves.
Initial Claims for Unemployment
It usually takes a jump or decline of at least 30K claims to signal a meaningful change in job growth. For the week ending September 6, first-time jobless claims jumped 11,000 to an annual rate of 315,000. Economists had predicted that the layoff activity measure would rise to 310,000 so these were slightly poorer than expected results. The prior week’s results were also revised higher by 2,000 from 302,000 to 304,000. The two increases for the past two weeks caused the four-week moving average to tick up 750 to 304,000. This is still near the 2014 low of 293,750, so I wouldn’t worry about this near-term jump.
For the month of August, headline Retail Sales rose 0.6% and July’s sales were revised higher to 0.3%. Core retails sales, which exclude automobiles, gasoline, construction materials and food services, increased 0.4% last month. And core retail sales for July were raised from 0.1% to 0.4%. Core retail sales are now up 4.1% in the past 12 months, which is still below pre-recession growth of 5.5%. But this is still a very positive report, as it shows that consumers are starting to spend more and that should add nicely to GDP growth in the third quarter.
This morning, the Commerce Department revealed that inventories increased 0.4% in July, which was right in line with economists’ expectations. Retail inventories, which exclude automobiles, rose 0.4%. Business sales increased 0.8%, and at the current sales pace, it will take 1.29 months for businesses to empty their shelves. July’s business inventories were unchanged from June, which was unrevised at a 0.4% gain. But, as we’ve discussed previously, small stockpiles are good for the U.S. economy, because as businesses restock, GDP growth improves.
That’s all I have for you this week. I’ll be in touch with the latest Portfolio Grader changes and Stock of the Day on Monday.
Have a great weekend,