What I Saw Last Week

Total Consumer Credit rose by $18.5B in July – I had forecast a more modest rise of $11.9B – after increasing a downwardly revised $11.9 billion (from $12.4B) in June.

Credit

The growth in July was driven by non-revolving credit, which was up $15.8B from June to $2.759T, and revolving credit, which increased by $2.6B to $991.9B.

Consumer credit increased at a seasonally adjusted annual rate of 6% in July with revolving credit increasing at an annual rate of 3.25% and non-revolving credit increasing at an annual rate of 7%.

Provided consumers weren’t making greater use of revolving credit lines to cover basic needs due to a shortfall in income, this report can ostensibly be looked upon as a good sign for the economy since the expansion of credit is an integral contributor to economic growth. It is hard to say, though, because there isn’t enough detail in the report and it is often subject to large revisions, which is why the market rarely shows much reaction to it.

What to Watch for This Week

Inflation – as measured by the Consumer Price Index – remains benign; however, we are likely to see a very modest increase when the August numbers are released.  Look for total inflation to have risen by 0.3% and the core rate up by 0.2%.

U.S. Retail Sales were better than expected in July with an increase of 0.6%. I expect to see a bit of a pullback in the August numbers with total sales up by 0.2% but core sales (ex-auto) should be up by 0.5%.

Consumer Sentiment in August was measured at 96.8 and I believe that the early September figure will come in at 95.5.

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