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Economic Advisor: August 15, 2018
August 15, 2018


 

The pace of consumer borrowing tapered, while wholesale inventory growth also slowed, and layoffs fell.

Consumer Credit

Consumer credit posted growth in June, growing 3.1 percent to reach a total of $3.907 trillion for the month, according to last week’s report from the Federal Reserve. This was well below the 7.5 percent growth consumer credit grew by in May.

Looking at the specific types of debt, non-revolving debt, such as car and student loans grew by 4.4 percent to hit a total of $2.868 trillion for June. However, that growth was undercut by a 0.2 percent decline in revolving debt, such as credit card spending.

After May’s 11.2 percent gain in revolving debt, the decline came as a surprise to many credit market watchers given the close relationships between credit cards and consumer spending. A reticence on the part of consumers to use their cards could hit consumer spending, which drives 70 percent of U.S. economic activity.

Wholesale Inventories

Bearing that in mind, wholesale inventories for June hit $632.4 billion, which was 0.1 percent higher than May, the Census Bureau reported last week. Wholesale inventories are important to track, because they indicate wholesalers’ anticipation for increased demand from retailers.

While June’s gains were welcome, the pace of wholesale inventory growth was off from May’s 0.3 percent gain Compared to the same period a year ago, June’s inventories were 5.1 percent over June 2017.

Initial Jobless Claims

First-time claims for unemployment benefits filed by laid-off Americans during the week ending August 4 dipped to 213,000, a decline of 6,000 claims from the preceding week’s total of 219,000, the Employment and Training Administration reported last week. This was welcome news given that the market had expected initial claims to reach 220,000.

Meanwhile, the four-week moving average — regarded as a more reliable measure of initial jobless claims — ticked down to 214,250, a dip of 500 claims from the prior week’s average of 214,750. Last week’s report also marked the 179th week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Tuesday — Import prices for July from the Bureau of Labor Statistics.
  • Wednesday — Retail sales for July and business inventories for June from the Census Bureau; industrial production and capacity utilization for July from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; housing starts and building permits for July from the Census Bureau and Department of Housing and Urban Development.
  • Friday — Consumer sentiment for August from the University of Michigan Surveys of Consumers; leading economic indicators for July from The Conference Board.

Posted in Economic Advisor



Economic Advisor: August 8, 2018
August 8, 2018


 

Construction spending suffered its largest monthly drop in more than a year, while unemployment declined slightly, and layoffs notched up.

Construction Spending

Construction spending for June fell to an annual rate of $1.31 trillion, a 1.1 percent drop

from May’s rate of $1.33 trillion, the Census Bureau reported last week. This marked the biggest monthly decline in construction spending since April 2017. That said, compared to last year, June’s spending was 6.1 percent higher than June 2017’s pace of $1.241 trillion.

Residential construction for June dipped to an annual rate of $568.3 billion, which was 0.5 percent below May’s rate of $570.9 billion. Spending on construction of single-family homes in June fell 0.4 from May to a rate of $287.4 billion. Spending on multi-family units in June dropped 2.8 percent from May to a pace of $59.8 billion.

For a housing market eager to add inventory, a drop in residential spending wasn’t welcome news. Moreover, it was a weak follow-up to the previous week’s report that housing starts had dropped to a nine-month low.

“This is in line with the soft readings of single-family and multifamily housing starts in June,” a statement from the National Association of Home Builders read. That said, NAHB added that, on a quarterly basis, private residential construction spending had climbed four percent in the second quarter.

Employment Situation

The economy added 157,000 jobs in July, with key growth sectors being professional and business services, manufacturing, healthcare, and social assistance, the Bureau of Labor Statistics reported last week. This pushed the unemployment rate to decline by 0.1 percent to 3.9 percent, with the number of unemployed persons falling by 284,000 to 6.3 million.

Average hourly earnings for all employees rose by seven cents in July to hit $27.05. Over the past 12 months, average hourly earnings have grown by 71 cents, or 2.7 percent. Average hourly earnings of production and nonsupervisory employees grew by three cents to $22.65 for the month.

The number of Americans unemployed on a long-term basis (27 weeks or longer) hovered at 1.4 million in July, accounting for 22.7 percent of the total unemployed population. The labor force participation rate — the percentage of employable Americans either working or actively looking for work — was unchanged at 62.9 percent for July.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending July 28 ticked up slightly to 218,000, a gain of 1,000 claims over the prior week’s total of 217,000, according to last week’s report from the Employment and Training Administration. This was less than economists’ expectations of a rise to 220,000.

The four-week moving average, which is considered a more stable measure of jobless claims, fell to 214,500, a drop of 3,500 claims from the preceding week’s average of 223,250 claims.

The latest report marked the 178th straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Monday — Consumer expectations for July from The Conference Board.
  • Tuesday — Consumer credit for June from the Federal Reserve.
  • Thursday — Producer prices for July from the Bureau of Labor Statistics; wholesale inventories for June from the Census Bureau; initial jobless claims from the Employment and Training Administration.
  • Friday — Consumer prices for July from the Bureau of Labor Statistics; federal budget for July from the Treasury Department.

Posted in Economic Advisor



Economic Advisor: August 1, 2018
August 1, 2018


 

Sales of existing homes and new homes both fell, while layoffs increased.

Existing Home Sales

Sales of existing single-family homes, townhomes, condominiums and co-ops, dropped 0.6 percent to an annual rate of 5.38 million in June, according to last week’s report from the National Association of Realtors. This marked the third consecutive monthly decline in sales, and when compared to the same period a year ago, June’s sales were down 2.2 percent from June 2017’s rate.

The median price for existing homes of all types reached an all-time high of $276,900 and marked the 76th consecutive month of year-over-year price gains. When compared to last year, June’s median price was 5.2 percent higher than June 2017’s $263,300.

June’s inventory of existing homes grew 4.3 percent to 1.95 million units for sale, representing a 4.3-month supply at June’s sales rate. Compared to the same period a year ago, this was 0.5 percent higher than June 2017’s 1.94 million and was the first year-over-year inventory increase since June 2015.

While the bump in inventory was welcome, the continued decline in sales volume is the result of a “severe housing shortage,” according to Lawrence Yun, chief economist for NAR.

“This dynamic is keeping home price growth elevated, pricing out would-be buyers and ultimately slowing sales,” he said in a statement from NAR. “It’s important to note that despite the modest year-over-year rise in inventory, the current level is far from what’s needed to satisfy demand levels,” added Yun. “Furthermore, it remains to be seen if this modest increase will stick, given the fact that the robust economy is bringing more interested buyers into the market, and new home construction is failing to keep up.”

New Home Sales

The news for new home sales was very similar. Sales of new single-family homes in June dipped to an annual rate of 631,000, which was 5.3 percent down from May’s pace of 666,000, and marked the second monthly decline in a row, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. That said, when compared to a year ago, June’s sales were 2.4 percent higher than the June 2017’s rate of 616,000.

In terms of price, June’s median price for new homes sold was $302,100 and the average sales price was $363,300. In terms of inventory, the estimated number of new homes for sale at the end of June totaled 301,000, representing a 5.7-month supply.

Initial Jobless Claims

First-time claims for unemployment benefits filed by laid-off Americans during the week ending July 21 rose to 217,000, an increase of 9,000 claims from the preceding week’s total of 208,000, the Employment and Training Administration reported last week.

Meanwhile, the four-week moving average — regarded as a more reliable measure of initial jobless claims — ticked down to 218,000, a dip of 2,750 claims from the prior week’s average of 220,750. Last week’s report also marked the 177th week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Tuesday — Personal incomes and spending for June from the Bureau of Economic Analysis; consumer confidence for July from The Conference Board.
  • Wednesday —  Construction spending for June from the Census Bureau and Department of Housing and Urban Development; car and truck sales for July from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Unemployment rate, payrolls, hourly earnings and average workweek for July from the Bureau of Labor Statistics; the balance of trade for June from the Bureau of Economic Analysis.

Posted in Economic Advisor



Economic Advisor: July 25, 2018
July 25, 2018


 

Housing starts experienced a sharp drop, while retail sales enjoyed solid growth, and layoffs dropped to lows not seen in nearly 50 years.

Housing Starts

Starts on construction of private housing fell to a nine-month low, dropping 12.3 percent from May to an annual rate of 1.17 million, the Census Bureau and Department of Housing and Urban Development jointly reported last week. Compared to last year, this was 4.2 percent below June 2017’s rate of 1.22 million.

Construction starts on single-family homes fell 9.1 percent in June to an annual rate of 858,000. Starts on buildings with five units or more plummeted 20.2 percent to 304,000.

For a real estate market desperate for inventory, this was not the best news. Most housing experts attributed the slowdown in housing construction to increased materials costs caused by the recent tariff war.

“The sector is struggling to manage labor shortages and sharply higher materials costs,” Alfstad Capital CEO Mike Alfstad told Baron’s. “It appears that is holding back building on spec. Might this also be the canary in the coal mine on tariffs?”

Retail Sales

Retail sales saw substantial growth in June, growing 0.5 percent to $506.8 billion, marking the largest monthly gain since September 2017, according to last week’s report from the Census Bureau. Compared to last year, June’s sales were 6.6 percent higher than June 2017’s retail sales.

Retail categories that saw solid gains were sales at health and personal care stores, which grew 2.2 percent; food services and drinking places, which increased 1.5 percent; non-store retailers, such as kiosks and online stores, which rose 1.3 percent; gas stations, which gained one percent; auto and other vehicle dealers, which notched up one percent.

Consumer spending drives roughly 70 percent of the U.S. economy, so continued gains in retail sales were good news to economists.

“This puts the economy in a very, very good position as it starts its 10th year of forward movement in July,” MUFG Chief Economist Chris Rupkey told the Reuters news service. “This strengthening economy gives the Federal Reserve the green light to raise rates a third time this year at their September meeting.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending July 14 dropped to 207,000, a decline of 8,000 claims over the prior week’s total of 215,000, according to last week’s report from the Employment and Training Administration. This was well below economists’ expectations of 224,000, and the lowest level of first-time jobless claims since December 6, 1969.

The four-week moving average, which is considered a more stable measure of jobless claims, fell to 220,500, a drop of 2,750 claims from the preceding week’s average of 223,250 claims.

The latest report marked the 176th straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market. 

This week, we can expect:

  • Monday — Existing home sales for June from the National Association of Realtors.
  • Wednesday — New home sales for June from the Census Bureau and Department of Housing and Urban Development.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; durable goods orders for June from the Census Bureau.
  • Friday — Consumer sentiment for July from the University of Michigan Surveys of Consumers; second quarter GDP from the Bureau of Economic Analysis.

Posted in Economic Advisor



Economic Advisor: July 18, 2018
July 18, 2018


 

Consumer borrowing saw solid gains, while inflation grew slightly, and lay-offs plummeted.

Consumer Credit

Consumer credit shot up by its biggest gain in six months, growing 7.6 percent in May to hit $3.89 trillion, according to last week’s report from the Federal Reserve. That’s a $24.5 billion gain in consumer borrowing, and it marked the biggest monthly increase since November 2016’s jump of $24.8 billion.

The big driver for May’s increase was due to gains in revolving debt, such as credit cards. Revolving debt grew 11.4 percent during the month to hit a total of $1.03 trillion. Consumer spending drives roughly 70 percent of U.S economic activity, and an increased willingness on the part of consumers to use their credit cards to back their spending is generally considered a good sign.

The other broad category of consumer credit, non-revolving debt, which covers loans such as student and car loans also fared well. Non-revolving debt grew 6.2 percent to hit $2.85 trillion, up from April’s $2.84 trillion. While not as sharp as the increase in credit card use, that 6.2 percent gain marked an acceleration in growth over April’s 3.9 percent gain.

Consumer Prices

Consumer prices grew slightly in June, with the Consumer Price Index notching 0.1 percent in June, the Bureau of Labor Statistics reported last week. This was down from May’s 0.2 percent growth and slightly below the 0.2 percent gain that economists had predicted. That said, core inflation, which ignores the volatile food and energy categories, grew 0.2 percent in June, which was in line with May’s 0.2 gain as well as economists’ expectations.

Price categories that saw solid growth during June included fuel oil, which was up 2.9 percent; gasoline, which saw a 0.5 percent gain; medical care, which grew 0.5 percent; used cars and trucks, which increased 0.7 percent; and new vehicles, which were up 0.4 percent. Notably, prices for electricity services were down 1.4 percent; gas utility prices declined 1.7 percent; and apparel prices fell 0.9 percent.

Will these price gains prompt the Federal Reserve to step in and increase interest rates in order to keep inflation in check? Probably not in the near term, especially considering it just increased them in June.

“While we continue to expect the next hike in September, even the hawks may sound more comfortable with the current gradual tightening pace,” JPMorgan Economist Michael Feroli told the Reuters news service.

Initial Jobless Claims

First-time claims for unemployment benefits filed by laid-off Americans during the week ending July 7 tumbled to 227,000, a fall of 18,000 claims from the preceding week’s total of 232,000, the Employment and Training Administration reported last week. This was well below than the 226,000 unemployment claims that job market watchers had anticipated. 

Meanwhile, the four-week moving average — regarded as a more reliable measure of initial jobless claims — ticked down to 223,000, a dip of 1,750 claims from the prior week’s average of 224,750. Last week’s report also marked the 175th week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Monday — Retail sales for June and business inventories for May from the Census Bureau.
  • Tuesday — Industrial production and capacity utilization for June form the Federal Reserve.
  • Wednesday — Housing starts for June from the Census Bureau and the Department of Housing and Urban Development.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.

Posted in Economic Advisor



Economic Advisor: July 11, 2018
July 11, 2018


 

Construction of new homes surged, and the nation’s overall employment situation continued to improve despite layoffs seeing some unexpected growth.

Construction Spending

Construction spending rose 0.4 percent in May to hit an annual rate of $1.309 trillion, marking a record high, according to last week’s report from the Census Bureau. Compared to last year, May’s spending was 4.5 percent higher than May 2017’s pace of $1.253 trillion.

Private construction spending was the big driver, growing 0.3 percent to an annual rate of $1.005 trillion, with residential construction growing a solid 0.8 percent to an annual rate of $553.8 billion for the month. Spending on construction of single-family homes grew 0.6 percent to reach an annual rate of $288.2 billion, and spending on multi-family units rose 1.6 percent to $61.8 billion.

This was welcome news for a housing market hungry for inventory, which helps keep prices under control, but external factors might temper that growth in the near future.

“Single-family homebuilding is continuing to expand, while multi-family construction has pulled out of a recent slump …,” noted Ken Simonson, chief economist for the Associated General Contractors of America, in a statement about May’s spending. “However, rising materials costs and shortages of qualified workers may stall all types of projects.”

Employment Situation

The economy added 213,000 jobs in June, but the unemployment rate rose to 4 percent, up from May’s 3.8 percent, the Bureau of Labor Statistics reported last week. Key job-growth sectors included professional and business services, manufacturing, and healthcare, while the retail sector lost jobs.

The population of unemployed Americans rose by 499,000 to 6.6 million people, but the reason for the increase was because the labor force participation rate — the number of employable people actively working or looking for work — increased in June. The labor force increased by 601,000 people, pushing the labor force participation rate up by 0.2 percent to 62.9 percent.

Looking at compensation, average hourly wages rose by five cents in June to hit $26.98. Over the past 12 months, average hourly earnings have grown by 72 cents, or 2.7 percent. Could wages go higher? Yes, if employers need to entice new hires, and there appears to be a shortage of employees, according to Mark Zandi, chief economist for Moody’s Analytics, which released a hiring report with Payroll processor ADP last week. 

“Business’ number one problem is finding qualified workers,” Zandi remarked in the report. “At the current pace of job growth, if sustained, this problem is set to get much worse.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending June 3 took an unexpected upswing, growing to 231,000, a gain of 3,000 claims over the prior week’s total of 228,000, according to last week’s report from the Employment and Training Administration. Economists had expected layoffs to fall to 225,000.

The four-week moving average, which is considered a more stable measure of jobless claims, grew to 224,500, an increase of 2,250 claims from the preceding week’s average of 222,250 claims.

Despite the unanticipated upturn, the job market remains healthy. This latest report marked the 174th straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Monday — Consumer credit for May from the Federal Reserve.
  • Wednesday — Producer prices for June from the Bureau of Labor Statistics; wholesale inventories for May from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; consumer prices for June from the Bureau of Labor Statistics; federal budget for June from the Treasury Department.
  • Friday — Import prices for June from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: July 5, 2018
July 5, 2018


 

New home sales saw their biggest jump of the year, while consumers fretted over tariffs, and layoffs jumped.

New Home Sales

Sales of new single-family homes hit a six-month high in May growing to an annual rate of 689,000, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. May’s sales were 6.7 percent higher than April’s pace of 646,000. When compared to last year, May’s sales towered 14.1 percent over May 2017’s estimate of 604,000.

Housing market watchers noted that while the sales jump was welcome, inventory still needs to grow to keep prices in check.

“While growth is a step in the right direction, there is still plenty of additional room for new home sales, with high price points being the major stumbling block,” noted Realtor.com Chief Economist Danielle Hale in a public statement. “Demand is strongest for affordable homes, but land, labor and materials costs are significant challenges. Builders who can successfully build lower-priced homes will find success.”

Looking at price, May’s average new home price was $368,500 and the median new home price rang in at $313,000. In terms of inventory, the number of new homes for sale at the end of May totaled 299,000, which represented a 5.2-month supply at May’s sales rate.

Consumer Outlook

Two key metrics for monitoring how consumers feel about the economy weakened in June. The Conference Board reported last week that its Consumer Confidence Index dipped to 126.4 in June (a baseline of 100 was set in 1985), down from 128.8 in May. The Present Situation Index — how consumers feel about the current state of the economy — hovered at 161.1, virtually unchanged from 161.2 in May. The Expectations Index — how consumers feel the economy will fare in the near future — fell from 107.2 in May to 103.2 in June.

Meanwhile, the Index of Consumer Sentiment, produced by the University of Michigan’s Surveys of Consumers, still grew, but at a much slower pace. June’s index ticked up slightly to 98.2 from 98 in May. The Current Economic Conditions Index increased to 116.5 in June, up from 111.8 in May, while the Index of Consumer Expectations dropped from 89.1 in May to 86.3 in June. That decline was primarily due to concerns about trade tariffs, according to Surveys of Consumers Chief Economist Richard Curtin.

“The potential impact of tariffs on the domestic economy was spontaneously cited by one-in-four consumers, with most expecting a negative impact on the domestic economy (21 percent out of 26 percent),” he noted in a public statement. “The primary concerns were a downshift in the future pace of economic growth and an uptick in inflation. A longstanding belief of consumers is that trade with other countries results in a broader range of available goods at lower prices.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending June 23 jumped to 227,000, a gain of 9,000 claims from the preceding week’s total of 218,000, the Employment and Training Administration reported last week. This was higher than the 220,000 layoff claims that job market watchers had anticipated. 

Meanwhile, the four-week moving average — regarded as a more reliable measure of initial jobless claims — skirted up to 222,000, a slight increase of 1,000 claims from the prior week’s average of 221,000. Last week’s report also marked the 173rd week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Monday — Construction spending for May from the Census Bureau.
  • Tuesday — Factory orders for May from the Census Bureau; car and truck sales for June from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Payrolls, unemployment rate, hourly earnings and average workweek for June from the Bureau of Labor Statistics; foreign trade for May from the Bureau of Economic Analysis.

Posted in Economic Advisor



Economic Advisor: June 27, 2018
June 27, 2018


 

Existing home sales continued to decline, while housing starts grew, and layoffs continued to fall.

Existing Home Sales

For the second month in a row, sales of existing single-family homes, townhomes, condominiums and co-ops fell in May, dropping 0.4 percent to an annual rate of 5.43 million, the National Association of Realtors reported last week. Compared to the same period a year ago, May’s sales were three percent below May 2017.

NAR Chief Economist Lawrence Yun chalked up May’s drop to poor inventory, saying that with the current economy and job market, sales volume across the nation should be much higher than where it’s at.

“Closings were down in a majority of the country last month and declined on an annual basis in each major region,” he explained in a public statement. “Incredibly low supply continues to be the primary impediment to more sales, but there’s no question the combination of higher prices and mortgage rates are pinching the budgets of prospective buyers, and ultimately keeping some from reaching the market.”

The reason why inventory is a key factor is that limited supply translates to higher prices. To that point, May’s median price for existing homes of all types hit an all-time high of $264,800, which was 4.9 percent higher than May 2017’s $252,500 and marks the 75th consecutive monthly year-over-year price increase.

That said, the inventory of existing homes at the end of May grew 2.8 percent to 1.85 million units, which is encouraging, but was 6.1 percent lower than May 2017’s 1.97 million existing homes. Inventory has dropped year-over-year for 36 straight months.

Housing Starts

In related housing inventory news, starts on construction of private housing in May hit an annual rate of 1.35 million, which was five percent higher than April’s pace of 1.28 million, according to last week’s joint report from the Census Bureau and the Department of Housing and Urban Development.

Compared to the same period a year ago, May’s housing starts were 20.3 percent higher than May 2017’s pace of 1.12 million. Also, starts on single-family homes grew to an annual rate of 936,000 in May, which was 3.9 percent over April’s pace of 901,000.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending June 16 dropped to 218,000, a decline of 3,000 claims over the prior week’s total of 221,000, according to last week’s report from the Employment and Training Administration.

The four-week moving average, which is considered a more stable measure of jobless claims, fell to 221,000, a drop of 4,000 claims from the preceding week’s average of 225,000 claims.

This latest report marked the 172nd straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Monday — New home sales for May from the Census Bureau and Department of Housing and Urban Development.
  • Tuesday — Consumer confidence for June from The Conference Board.
  • Wednesday — Durable goods orders for May from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Personal incomes and spending for May from the Bureau of Economic Analysis; consumer sentiment for June from the University of Michigan Surveys of Consumers.

Posted in Economic Advisor



Economic Advisor: June 20, 2018
June 20, 2018


 

Retail sales surged, accompanied by continued consumer prices gains, while layoffs fell.

Retail Sales

Retail sales enjoyed their biggest monthly gain in six months, growing 0.8 percent in May to hit $502 billion, the Census Bureau reported last week. Compared to the same period last year, this was 5.9 percent higher than May 2017.

Key growth sectors included miscellaneous retailers, which grew 2.7 percent; building materials and garden supplies, which increased 2.4 percent for the month; gasoline stations, which increased 2 percent; department stores, which expanded 1.5 percent; and clothing and accessories stores, which gained 1.3 percent.

Given that consumer spending drives 70 percent of U.S. economic activity, May’s surge came as good news to economists.

“The consumer is on fire,” Amherst Pierpont Securities Chief Economist Stephen Stanley told the New York Times. “The combination of lower taxes and a drum-tight labor market are producing very solid growth in disposable income.”

Consumer Prices

The Consumer Price Index grew 0.2 percent in May, continuing its 0.2 percent increase in April, according to last week’s report from the Bureau of Labor Statistics. Compared to last year, the index grew 2.8 percent from May 2017.

The key drivers for May’s gains included gasoline prices, which grew 1.7 percent to offset a decline in fuel oil prices, and a marginal 0.1 percent gain in electricity prices. A 1.3 percent gain in medical prices and a 0.3 percent increase in shelter prices also contributed to May’s CPI gain.

Core inflation — consumer prices minus the volatile food and energy categories — matched CPI growth for the month, increasing 0.2 percent for the month.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending June 9th fell to 218,000, a decline of 4,000 claims from the preceding week’s total of 222,000, the Employment and Training Administration reported last week. This was considerably lower than the 225,000 layoff claims that job market watchers had anticipated. 

Meanwhile, the four-week moving average — regarded as a more reliable measure of initial jobless claims — ticked down to 224,250, a drop of 1,250 claims from the prior week’s average of 225,500. Last week’s report also marked the 171st week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.

Notably, last week’s report marked the first report since hurricanes Harvey, Irma, and Maria in which the Administration didn’t note that the impacts of the storms continued to throw off layoffs reporting.

This week, we can expect:

  • Tuesday — Housing starts for May from the Census Bureau.
  • Wednesday — Existing home sales for May from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for May from the Conference Board.

Posted in Economic Advisor



Economic Advisor: June 13, 2018
June 13, 2018


 

Consumer credit saw a small uptick, while wholesale inventories grew, and layoffs fell slightly.

Consumer Credit

Consumer borrowing grew 2.9 percent in April to hit $3.882 trillion, according to last week’s report from the Federal Reserve. April’s credit gains marked the smallest increase in seven months.

Growth in consumer credit was balanced between the two main categories: revolving debt, such as credit cards, and non-revolving debt, such as student and car loans. Revolving debt increased 2.6 percent in April to hit $1.03 trillion for the month. Non-revolving debt grew 3 percent to hit $2.85 trillion.

The real story here is that revolving debt saw a gain after suffering its biggest drop since 2012 in March, which posted a 1.3 percent decline. Revolving debt has seen weak performance since November 2017, so the increase was welcome.

Wholesale Inventories

Total inventories for merchant wholesalers grew to $630.2 billion at the end of April, representing a 0.1 percent gain over March, according to last week’s report from the Census Bureau. Compared to the same period last year, inventories were up 5.8 percent from April 2017 level.

Wholesale inventories are important to monitor because they indicated anticipated retail activity. When wholesalers expand inventories, they are anticipating more demand from retailers. That’s a good sign, because consumer spending drives 70 percent of U.S. economic activity.

Meanwhile, wholesale sales for April hit $493.3 billion, which was 0.8 percent up from March. This put April’s inventories-to-sales ratio at 1.28. For comparison, April 2017’s ratio was 1.3.

Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending June 2 ticked down to 222,000, a dip of 1,000 claims over the prior week’s total of 223,000, according to last week’s report from the Employment and Training Administration. 

The four-week moving average, which is considered a more stable measure of jobless claims, grew to 225,500, a gain of 2,750 claims from the preceding week’s average of 222,750 claims. 

This latest report marked the 170th straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market. The Administration added that it continues to experience hurricane-related reporting difficulties in the Virgin Islands and Puerto Rico.

This week, we can expect:

  • Tuesday — Consumer Price Index for May from the Bureau of Labor Statistics; Federal budget for May from the Treasury Department.
  • Wednesday — Producer Price Index for May from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; import prices for May from the Bureau of Labor Statistics; retail sales for May, and business inventories for April from the Census Bureau.
  • Friday — Consumer sentiment for June from the University of Michigan Surveys of Consumers; industrial production and capacity utilization for May from the Federal Reserve.

 

Posted in Economic Advisor



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