It’s Monday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here. Let’s take a look at this week’s big headlines:
#1—Fantastic Plastic: Consumer Credit Surges
In May, consumer credit surged $19.6 billion. This was sharply higher than the $10.9 billion gain seen in April and well above the $10.5 billion rise forecast by economists. What economists didn’t see coming was a 9.3% jump in revolving credit, which includes credit cards debt. Meanwhile, non-revolving debt, which includes student, auto and personal loans, ticked up to $1.98 trillion. Rising credit card balances suggest that Americans are becoming more confident with their personal finances. Naturally, as consumers have more availability to credit, it helps to boost overall consumer spending.
#2—An Ominous Sign for Q2 GDP: Wholesale Inventories
In May, stockpiles held by wholesalers fell 0.5% from April, despite the fact that wholesale sales advanced 1.6%. This underperformed economists’ expectations of a 0.4% rise. The Commerce Department also revised April wholesale inventories down to reflect a 0.1% decline—the previous estimate had called for a 0.2% gain. Since inventories dramatically impact GDP growth, many economists’ estimates for second quarter GDP growth are down to just 1.5%. This is down from the 1.8% growth rate seen in the first quarter. This is yet another reason why I expect that the Fed will not immediately curtail its Quantitative easing, since any evidence of accelerating GDP growth has yet to materialize.
3—Summertime Layoffs Heat Up: Jobless Claims
Last week, new jobless claims spiked 16,000 to a 360,000 annual rate. This came as somewhat of a surprise to economists, who had predicted that claims would rise, but just to a 345,000 annual rate. Additionally, the previous week’s figure was revised up by 1,000. This has caused the four-week moving average to rise 6,000 to a 351,750 annual rate. Jobless claims are officially at a two-month high. But before we panic over the sudden surge, keep in mind that the summer tends to be a particularly volatile time for hiring. This is the time of year that auto plants shut down for retooling and schools see temporary layoffs due to the end of the school year. So we could very well see a similarly dramatic rebound in the coming weeks.
4—Inflation’s A Brewin’: Producer Price Index
In June, wholesale prices climbed 0.8%. This represents the highest monthly rise since last September and was substantially higher than the consensus estimate, which called for a 0.5% rise. The unexpected jump was mostly caused by a 2.9% jump in energy prices, particularly a 7.2% surge in wholesale gasoline prices. Then again, this increase can be attributed to higher demand (summer is road trip season) and tighter inventories. Excluding food and energy prices, core PPI climbed 0.2%, just above the 0.1% consensus estimate. Over the past 12 months, wholesale prices have risen 2.5%. This is the highest annual rate since March 2012, so inflation is starting to emerge. In the meantime, I’m interested to see if this also applies to consumer prices—we’ll find out when the Consumer Price Index report is released this Tuesday.