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’s take a look at this week’s big headlines:
Consumer Credit Rises in July
In the month of July, consumer credit increased $19.1 billion, rising to a seasonally adjusted 6.7% annual rate, according to the Federal Reserve. Economists had expected consumer credit to increase $18 billion. Breaking it down, revolving credit rose at a 5.7% rate in July, down from 10% in the previous month, while non-revolving credit rose at a 7% annual rate. Consumers spent slightly less in the month of July compared to June. The amount of credit taken out by consumers has risen every month since August 2011. Overall, the rise in consumer credit is a positive sign for GDP growth.
Jobless Claims Drop
For the week ending September 4, initial claims for unemployment fell by 6,000 to 275,000, meeting economists’ estimates. Meanwhile, the four-week moving average rose by 500 to 275,750 and the previous week’s claims were revised down to 281,000. Jobless claims still remain under 300,000, so things are still looking solid for the labor market. However, this report is following last week’s mixed Unemployment report, which showed a drop in payroll jobs and drop in unemployment rate. And earlier this week the JOLT survey reported that there was a massive surge in job openings. So, while overall the labor market is inching its way back, I don’t think this particular set of data is strong enough to warrant a Fed rate hike.
Wholesale Inventories Stockpiles Fall
Wholesale inventories fell slightly by 0.1% in July, missing economists’ expectations for a 0.3% gain. This is the first drop in inventories since 2013. Inventories of durable goods and machinery rose 0.1%, while non-durable goods dropped 0.5%. Wholesales fell 0.3% in July and the inventory-to-sales ratio remained unchanged at 1.30 months. Meanwhile, June’s inventories increase was revised down to 0.7% from 0.9%. Inventories are an important driver of economic growth, so the recent drip in inventories shows that growth has slowed a bit, especially given the high inventory-to-sales ratio.
Producer Price Index Remains Unchanged
On Friday, the U.S. Labor Department reported that Producer Price Index (PPI) reading was flat for the month of July, remaining unchanged. The core PPI, which excludes food and energy prices, rose 0.3%. Economists expected the headline index to fall 0.1% and core prices to increase by 0.1%, so headline wholesale prices were better-than-expected, but not by much. Producer prices have fallen 0.8% year-on-year, which marks the seventh straight 12-month decline. So inflation remains relatively non-existent, which poses a conundrum for the Fed. While the rest of Wall Street is anxiously awaiting the rate hike announcement, I still believe the economic data is not strong enough to warrant a hike just yet, and even if they do, it will be a very minimal increase.
That’s all I have for you this week; I’ll be in touch again next week with the latest ratings updates out of Portfolio Grader.
Have a great weekend,