News & Events

Economic Advisor: August 17, 2017
August 17, 2017


 

Consumer credit continued to rise, albeit at a slower rate, and wound up hitting a record. Meanwhile, consumer prices saw a small increase, and layoffs saw a small increase.

Consumer Credit

The pace of consumer borrowing growth tapered a bit, but continued to climb, and hit new heights in the process. Total consumer credit increased 3.9 percent in June to hit a new record high of $3.855 trillion, according to last week’s report from the Federal Reserve.

Non-revolving debt, such as student loans or car loans, increased 3.5 percent to hit $2.834 trillion. Revolving debt, such as credit cards, grew 4.9 percent to reach $1.021 trillion.

The credit report is closely watched for clues about the direction of consumer spending, which accounts for about 70 percent of economic activity.

“America’s credit card balances have never been higher, but there’s no reason to think they won’t just keep climbing,” CreditCards.com Senior Industry Analyst Matt Schulz told CBS News. “Combine that with steadily rising interest rates and you have a potentially volatile mix. … “This record should serve as a wake-up call to Americans to focus on their credit card debt.”

Consumer Price Index

In related news, the Consumer Price Index for All Urban Consumers (CPI-U) notched up 0.1 percent during July, the Bureau of Labor Statistics reported last week. Over the last 12 months, the index has increased 1.7 percent.

The index for all items less the volatile food and energy categories — otherwise known as core inflation — also grew 0.1 percent. Key categories outside of food and energy that helped drive July’s growth included medical care commodities, which grew 1 percent; medical care services, which increased 0.3 percent; and apparel, which also grew by 0.3 percent.

Consumer prices are a key indicator for housing market watchers as the Fed will raise key interest rates in order to keep inflation in check. With only small increases, that doesn’t look likely.

“We believe the Fed will focus on the balance sheet in September, foregoing another rate hike until December,” IHS Markit Economist James Bohnaker told the Reuters news service. “The inflation outlook will not change drastically anytime soon.”

Initial Jobless claims

Turning to employment, first-time claims for unemployment benefits filed by the newly unemployed during the week ending August 5, grew to 244,000, a gain of 3,000 claims from the prior week’s total of 241,000, according to last week’s report from the Employment and Training Administration. This week’s total was slightly higher than market expectations of 242,000 claims.

The four-week moving average — considered a more stable measure of jobless claims — notched down to 241,000, a decrease of 1,000 claims from the preceding week’s average of 242,000 claims.

  • This marked the 127th week that initial claims have fallen below the 300,000-claim level, which economists consider an indicator of a growing job market.
  • This week, we can expect:
  • Tuesday — Retail sales and import prices for July and business inventories for June from the Census Bureau.
  • Wednesday — Housing starts and building permits for July from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for July from The Conference Board; industrial production and capacity utilization for July from the Federal Reserve.
  • Friday — Consumer sentiment for August from the University of Michigan Surveys of Consumers.

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