What I Saw Last Week

Total outstanding Consumer Credit rose by $16.6 billion in July – beating my forecast for an increase of $14.5 billion – following a downwardly revised $8.5 billion (from $10.2 billion) in June.


Non-revolving credit increased by $15.4 billion to $2.88 trillion and revolving credit rose by $1.2 billion to $1.04 trillion.

Consumer credit rose at a seasonally adjusted annual rate of 5.0% in July, with revolving credit increasing at an annual rate of 1.5% and non-revolving credit increasing at an annual rate of 6.5%.

The takeaway from this report is that the credit expansion in July was driven almost entirely by non-revolving credit possibly suggesting some caution from consumers when it comes to credit card use.

Inflation, as measured by the Consumer Price Index, matched my forecast for an increase of 0.2% with the core rate up by 0.1%.


The bump in total CPI in August was driven by the indexes for shelter (+0.3%) and energy (+1.9%), while Core CPI was pushed up primarily by the shelter index, but a 1.6% drop in the apparel index and a 0.2% decline in the medical care index helped hold things in check.

On a year-over-year basis, total CPI was up 2.7%, versus 2.9% in July, and core CPI was up 2.2% versus 2.4% in July, which is the largest 12-month increase since September of 2008.

The takeaway from this report is that there was a moderation in the year-over-year growth rates for total CPI and core CPI. I do not believe that the report will alter the prevailing view that the Federal Reserve is likely to raise rates two more times this year, yet the moderation is apt to be seen as a data point that could keep the Federal Reserve from tightening rates too rapidly.

U.S. Retail Sales in August were a disappointment with total sales up by a paltry 0.1% – I had forecast 0.4% –  following an upwardly revised 0.7% (from 0.5%) in July and the core rate (which excludes auto sales) up by 0.3% following an upwardly revised 0.9% (from 0.6%) in July – I had forecast a 0.5% increase.


Total retail sales were weighed down by a 0.8% decline in motor vehicle and parts dealers sales, as well as a 1.7% decline in clothing and clothing accessories stores sales.

The upward revisions to the prior month did help mitigate some of the headline disappointment for August, yet the takeaway from the report is that consumer spending is up and should continue to support real GDP growth in the third quarter.

The early September Consumer Sentiment figure came in at 100.8 (I had forecast a smaller increase to 97.0) from the final August figure of 96.2. Notably, it now stands at the second highest level seen since 2004.


The Index of Consumer Expectations rose to 91.1 from 87.1 in August, hitting its highest level since July 2004 and the Current Economic Conditions Index increased to 116.1 from 110.3.

The takeaway from the report is that the pickup in sentiment was widespread across all major socioeconomic groups, which is a good underpinning for solid consumer spending activity.

What to Watch for This Week

The NAHB Housing Market Index for September is likely to show a small drop from 67 to 66 as builders continue to worry about material and land costs.

U.S. Building Permits were running at an annual rate of 1.311 million units in July and I expect the August number to come in at around 1.3 million.

U.S. Housing Starts were measured at 1.168 million units in July and I hope to see August numbers at around 1.2 million units.

U.S. Existing Home Sales in July came in at an annual rate of 5.34 million sales and the August figure should show a very modest increase to 5.35 million.