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Last Week’s Economic News In Review April 13, 2016

Market-Update-E Jansen

Consumer credit continued a trend of healthy growth, while wholesale inventories fell, and lay-offs dropped.

Consumer Credit

Consumer credit grew by 5.8 percent in February to hit a total of $3.56 trillion, the Federal Reserve reported last week. At this point, consumer credit has demonstrated reliable growth over the past year, posting gains of at least 5 percent each month, according to MarketWatch.

The big driver for February’s growth was non-revolving debt, such as student and car loans, which increased 6.6 percent to hit $2.62 trillion for the month. Meanwhile revolving debt, such as credit cards, grew 3.7 percent to reach $940.6 billion.

Revolving debt will continue to be the closest watched component of consumer borrowing as credit card use indicates consumers’ willingness to spend, which is important given that consumer spending drives roughly 70 percent of the U.S. economy.

Wholesale Inventories

If wholesale inventories are any indicator of future consumer spending, the U.S. economy might be in for some bumps. Wholesale inventories fell 0.5 percent to $583.3 billion in February, the Census Bureau reported last week. This was the farthest drop since May 2013. That said, compared annually, February’s inventories were 0.6 higher than February 2015’s totals.

Wholesale inventories are important to track, as they indicate wholesalers’ outlook on how much they think their retailer customers will purchase from them, which in turn points to anticipated consumer spending. In February’s case, analysts had expected a 0.2 percent drop, so the unexpected tumble could be reason for worry.

In terms of sales, February saw sales for wholesalers drop 0.2 percent to $427.6 billion. Compared annually, this was down 3.1 percent from February 2015. February’s inventories-to-sales ratio for merchant wholesalers was 1.36, which was up from the February 2015 ratio of 1.31.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the recently laid off during the week ending April 2 dropped to 267,000, a decline of 9,000 claims from the previous week’s total of 276,000, according to last week’s report from the Employment and Training Administration. This marked the 57th consecutive week of initial claims below the 300,000-claim mark that economists consider a healthy job market; the longest streak since 1973.

“The persistently low level of claims should provide some reassurance that the economy is growing,” Jim Baird, chief investment officer for Plante Moran Financial Advisors, told the New York Times.

The four-week moving average — considered a more stable measure of lay-offs — grew to 266,750 claims, an increase of 3,500 claims from the preceding week’s average of 263,250. This week we can expect:

  • Tuesday — Import and export prices for March from the Census Bureau.
  • Wednesday — March budget from the Treasury Department; producer price index for March from the Bureau of Labor Statistics; March retail sales from the Census Bureau.
  • Thursday — March consumer price index from the Bureau of Labor Statistics; initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Industrial production and capacity utilization for March from the Federal Reserve; April consumer sentiment from the University of Michigan and Thomson-Reuters survey of consumers.