Consumer Demand for Revolving
Credit Continues to Rise
September 18, 2007--The trade deficit narrowed in July, falling
$0.2 billion to $59.2 billion. Concurrently, consumer credit rose
3.7% (annualized rate) to $2.456 trillion. In August, retail sales
increased 0.3% while industrial production grew 0.2%. Last,
business inventories rose 0.5% in August while sales jumped 1.1%.
International Trade
The trade deficit narrowed in July, falling $0.2 billion to $59.2
billion, a 0.3% decrease. Both imports and exports increased, but
export growth was stronger, rising 2.7% to $137.7 billion. Imports
rose 1.8% to $196.9 billion. The goods deficit with China jumped
12.5% to $23.8 billion and now accounts for 40% of our trade
deficit. The weak dollar, which makes imports more expensive and
exports cheaper, along with the continued revaluation of the Yuan,
should help our trade deficit narrow going forward.
Consumer Credit
Consumer credit rose $7.5 billion to $2.456 trillion in July, a
3.7% (annualized rate) uptick. The increase was driven by growth
in both revolving and nonrevolving credit, which grew 6.8% and
2.0%, respectively. Going forward, demand for revolving credit
should continue to increase as people draw less from home equity
and have to finance expenditures with credit cards. Increases in
nonrevolving credit should be more temperate due to modest auto
sales.
Retail Sales
Total retail sales rose 0.3% in August after rising 0.5% in July.
The overall increase was driven mainly by a 2.8% surge in sales at
motor vehicle and parts dealers. Core sales, which exclude gas and
auto sales, fell 0.1% for the month. On a year-ago basis, top-line
retail sales have increased 3.7% and core sales are up 4.9%. We
expect continued moderate growth in retail sales going forward.
Industrial Production
Industrial production increased 0.2% in August following an
upwardly revised 0.5% climb in July. Growth was caused entirely by
a 5.3% jump in utilities output. Manufacturing and mining output
both decreased for the month, falling 0.3% and 0.6%, respectively.
Last, capacity utilization remained unchanged at an elevated 82.2%
and continues to raise inflationary concerns.
Business Inventories
Total business inventories increased 0.5% in August following a
0.4% rise in July. Inventories at retailers grew 1.0% while
manufacturer and wholesaler inventories both rose 0.2%. Total
business sales rebounded in August, jumping 1.1% after falling
0.3% the previous month. Last, the inventory-to-sales ratio fell
to 1.26
Economy Sheds 4,000 Jobs in August
September 11, 2007--The labor markets shed 4,000 jobs in August as
the unemployment rate held steady at 4.6%. Concurrently, the ISM
index decreased but remained in expansionary territory. In the 2nd
quarter, nonfarm business productivity increased 2.6% while unit
labor costs inched up 1.4%. Last, wholesale inventories increased
0.2% in July as sales grew 0.1%.
Employment Situation
In a surprising report, the labor market shed 4,000 jobs in
August, the first monthly overall decline since August 2003. The
decrease was caused by the goods-producing industry, which dropped
64,000 jobs from the payroll. The government also cut 28,000 jobs.
Average hourly earnings increased from $17.45 to $17.50, a 0.29%
uptick. Last, the unemployment rate held steady for the month at
4.6%.
ISM Index
For the second consecutive month, the ISM index inched down,
decreasing 0.9 points in August to 52.9. Manufacturing activity,
however, is still in expansionary territory (above 50). New orders
fell slightly but production and new export orders both inched
upward. On the inflation front, "prices paid" fell to 63.0 and has
steadily decreased from its high of 73.0 in April. This month's
report will provide ammunition to proponents of a Fed rate cut.
Productivity and Costs
Nonfarm business productivity increased 2.6% (SAAR) in the 2nd
quarter, an acceleration from the 0.7% rise during the 1st
quarter. On a year-ago basis, productivity has increased 0.9%.
There was good news on the inflation front, as unit labor costs
grew 1.4%, a welcome slowdown from the 5.2% surge during the 1st
quarter. However, on a year-ago basis, unit labor costs are up
4.9%, its largest year-over-year increase since 2000.
Wholesale Trade
Wholesale inventories increased 0.2% in July while sales inched up
0.1%. Inventories for durable goods fell 0.5% as durable goods
sales were unchanged. Concurrently, nondurable goods inventories
increased a strong 1.5% while sales edged up 0.1%. Last, the I/S
ratio, which measures how many months it would require to deplete
current inventories at the existing pace of sales, remained at
1.11
GDP Growth Strong in Q2
September 4, 2007--The GDP grew at a 4.0% rate in the 2nd quarter,
a welcome improvement from the weak 0.6% growth in the 1st
quarter. Existing home sales fell 0.2% in July and are down 9.0%
compared to a year ago. Concurrently, personal income rose 0.5%
and the PCE deflator inched up only 0.1%.Lastly, factory orders
increased a larger-than-expected 3.7%.
Gross Domestic Product
The 'preliminary' estimate by the BEA indicates that the GDP grew
4.0% in the 2nd quarter, rebounding from the anemic 0.6% increase
in the 1st quarter. GDP growth was driven by an improvement in the
trade balance as well as stronger government spending. The weak
housing market continues to be a negative weight, but its drag on
growth is gradually decreasing. Corporate profits set a new
record, increasing $98.3 billion to $1.646 trillion. Lastly, on a
year-ago basis, the GDP has increased 1.9%, well below its growth
potential of 3.0%.
Existing Home Sales
Sales of existing homes fell 0.2% in July to 5.75 million units
(seasonally adjusted annual rate) and are down 9.0% on a
year-over-year basis. Concurrently, the median sale price for an
existing home fell 0.1% to $228,900 and is down 0.6% compared to
last July. Lastly, inventories jumped 5.5% to 9.6 months of supply
and are up 31.5% compared to June 2006. Overall, the housing
market remains weak.
Personal Income
Personal income rose 0.5% in July, improving on the 0.4% increase
in June. Concurrently, consumption grew 0.4%. On the inflation
front, the numbers were encouraging. Both the top-line PCE
deflator and the core PCE deflator, which excludes food and
energy, grew only 0.1%. On a year-ago basis, the PCE deflator is
up 2.1% while the core PCE deflator has increased 1.9%. Lastly,
the saving rate improved in June, increasing to 0.7%.
