June 8, 2012
We had three domestic economic reports released today, and they shed light on three crucial parts of the U.S. economy: the state of the American consumer, international trade as well as the manufacturing sector.
In April, consumer credit rose by $6.5 billion, just about half of March's $12.4 billion gain. Meanwhile, the economist community expected the measure to climb $10 billion. Interestingly enough, revolving debt fell by $3.4 billion as consumers ramped up their efforts to pay off their credit cards. Non-revolving debt (which includes student loans) continued to balloon, rising $10 billion in April; this represents the largest gain in three months.
The decline in revolving debt could very well be a reflection of moderating consumer confidence. The good news is that personal spending still increased more than expected in April, but I'll be keeping an eye out for next week's retail sales report to get a better grasp of consumer spending trends.
In April, the U.S. narrowed its trade deficit to $50.1 billion, down from $52.6 billion in the prior month. Economists expected the trade gap to narrow down to $49.5 billion. This time, exports fell 0.8% to $182.9 billion due to moderating international demand for capital and industrial goods. However, imports fell by a larger margin—1.7%—to $233 billion.
It is encouraging that the trade deficit is continuing to narrow despite the turmoil in Europe and China's cooling economy.
The Wholesale Inventories report ended the week on a high note after the Commerce Department announced that stockpiles jumped 0.6% in April. This was also significantly higher than the 0.2% gain forecast by economists as well as the 0.3% gain the prior month. In particular, stockpiles of durable goods advanced 1.1%—the highest since May 2011. And thanks to booming petroleum sales, wholesalers posted a 1.1% gain in sales, also way above the 0.3% consensus forecast.
This solidifies my thesis that the manufacturing sector is on the mend; this is great news for second-quarter GDP.
Next week, we'll get additional data on the state of the American consumer, including May retail sales and the consumer price index. I'll keep an eye out for these reports as they come in, so be sure to check the blog next week for important macroeconomic updates.