What I Saw Last Week

Total outstanding Consumer Credit rose by $24.5 billion in May – well above my forecast an increase of $12.4 billion – after increasing by an upwardly revised $10.3 billion (from $9.3 billion) in April.


Of note is that the credit expansion in May was the largest since November 2017 and was fed by sizable increases in both revolving as well as non-revolving credit.

Revolving credit increased by $9.7 billion from April to $1.039 trillion – the largest pickup in revolving credit since November 2017.  Non-revolving credit increased by $14.8 billion to $2.858 trillion – again the largest pickup in non-revolving credit since November 2017.

Consumer credit increased at a seasonally adjusted annual rate of 7.50% in May, with revolving credit increasing at an annual rate of 11.5% and non-revolving credit increasing at an annual rate of 6.25%.

The takeaway from the report is that the surge in credit expansion will serve as a catalyst for a strong pickup in consumer spending that should manifest itself in a strong Q2 GDP number.

Inflation, as measured by the Consumer Price Index, rose by 0.1% in June with the core rate up by 0.2%.  I had expected to see both the overall rate and core rate up by 0.2%.


Total CPI was up 2.9% year-over-year, which is the largest 12-month increase since February 2012. Core CPI was up 2.3% year-over-year, versus 2.2% in May.

This substantial increase is a sign of a growing economy, but it’s also a painful development for workers, whose tepid wage gains have failed to keep pace with rising prices.

The takeaway from the report is that consumer inflation is picking up and gives the Federal Reserve the data-based cover it is seeking to continue raising the fed funds rate.

Consumer Sentiment in early July dropped to 97.1 from 98.2 in June – I had forecast a drop to 97.8.


The current Index dropped to 113.9 from 116.5 while the Index of Expectations edged up to 86.4 from 86.3.  Of note is that the July reading for the overall Index is nearly equal to the average in the prior twelve months (97.7).

The takeaways from the report are twofold: (1) it revealed negative concerns about the impact of trade tariffs are rising among the top third of the income distribution, who account for half of consumer spending and (2) consumers under the age of 45 are anticipating the largest income gains since July 2000.

What to Watch for This Week

U.S. Retail Sales was solid in May with a monthly increase of 0.8% and the core rate up by 0.9%.  I expect to see the June numbers show total sales up by 0.5% and core sales (ex-auto) up by 0.3%.

The NAHB Housing Market Index dropped 2 points to 68 in June – mainly due to rising material costs – and I expect to see the July figure tick back up to 69.

U.S. Housing Starts rose 5% month-over-month in May to a seasonally adjusted annual rate of 1.350 million units.  The June number is likely to show starts drop further to an annual rate of 1.320 million.

U.S. Building Permits dropped 4.6% to an annual rate of 1.301 million units in May and the June figure will likely show some growth with the annual rate rising to 1.330 million.