What I Saw Last Week

On Wednesday, the Federal Reserve released data regarding Consumer Credit in April and the number was a disappointment.  Total credit expanded by $8.1B – I had forecast a more robust increase of $15.0B.

Credit

The growth in April was driven predominately by non-revolving credit, which was up $6.6B from March to $2.81T.  Revolving credit increased by $1.5B to $1.011T.

Credit2

Consumer credit increased at a seasonally adjusted annual rate of 2.5% in April, with revolving credit increasing at an annual rate of 1.75% and non-revolving credit increasing at an annual rate of 3%.

This is the slowest growth in consumer credit since 2011, nearly 6 years ago. With 70% of US economic growth derived from consumer consumption, this declining trendline is worrisome for future growth.  Total household net debt reached a new record, surpassing 2008 which was driven by the exceptional growth in student debt and auto loans, the latter being key in consumer credit use.

What to Watch for This Week

U.S. Retail Sales rose by 0.4% in April and I expect to see the May number come in lower with total sales up by 0.1% and core sales up by 0.2%. 

Inflation, as measured by the Consumer Price Index, is likely to remain unchanged in May, but the core rate should have risen by 0.2%.

U.S. Building Permits should rise from the annual rate of 1.229M seen in April. My call is for an increase to an annual rate of 1.250M.

U.S. Housing Starts rose at an annualized rate of 1.172M in April and I expect the May figure to come in at 1.227M units. 

Consumer Sentiment in early June will likely drop just a little from the final May figure of 97.1. I am looking at 97.0.

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