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…
Balance of Trade Report
On Tuesday, the Commerce Department reported that the U.S. trade deficit rose 5.3% in December to $53.1 billion, up from a revised $50.4 billion in November. December also marks a nine-year high of the U.S. trade deficit. For full-year 2017, the trade deficit surged 12%.
Taking a closer look at the details, imports increased 2.9% to $210.8 billion in December, supported largely by food and capital and consumer goods. For the year, imports surged 6.7% to $2.9 trillion, a record high. U.S. exports jumped 5.5% in 2017 to $2.3 trillion. The deficit with China moved 8.1% higher last year to record high of $375.2 billion. Meanwhile, the trade gap with Mexico widened 10% to $71.1 billion. Interestingly, Apple’s iPhone X, which is manufactured in China, is one major catalyst to the rise in our trade deficit.
Overall, the widening trade deficit is not very surprising given the rise in inventories, which I will discuss shortly. Also, the trade deficit could constrain GDP growth in the near-term. However, if trade numbers are adjusted lower in the upcoming months, we would likely see GDP growth be revised higher.
Consumer Credit Report
On Wednesday, the Federal Reserve Board of Governors published December’s Consumer Credit Report. Headline consumer credit increased $18.4 billion to a seasonally adjusted $3.84 trillion in December, lower than the expected $20 billion increase. This translates to an annual growth rate of 5.8%.
If you recall, revolving credit largely represents credit card borrowing, and this category of credit hit $1.03 trillion, a new record high. Non-revolving credit, which reflects car and school loans, rose 0.5% from November to December to $2.81 trillion. While a pickup in consumer credit does not necessarily bode well for individual credit quality, it’s still a positive indicator for short-term consumer spending.
This morning, the Commerce Department reported that total inventories of merchant wholesalers climbed 0.4% in December to $612.1 billion, up from November’s revised total of $609.7 billion. Economists were expecting total inventories to grow 0.2%, so December’s pace was slightly faster than anticipated. Business sales increased 1.2% from November to $500.2 billion in December.
At December’s pace, it would take 1.22 months for businesses to clear their shelves, faster than the 1.29 months recorded in the year ago period. All-in-all, inventories are modestly higher than November’s levels, suggesting that demand has moderated from the busy holiday shopping season. But, the pickup in sales helps to offset wholesale inventories.
That’s all I have for you this week. I’ll be in touch again next week with the latest ratings out of Portfolio Grader.
Until next week,