Consumer Credit for April fell to $1.3B versus estimates of $7.4B and an upwardly revised $6.9B in March. Borrowing by US consumers grew in April at the slowest pace in five months. Credit-card borrowing fell for a second straight month, Bloomberg reported. "This slowdown in consumer credit outstanding fits the soft-patch economy story hand-in-glove," said Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi. The average annual credit-card interest rate rose from 13.2% in 2004 to 14.1% in the first quarter, according to the Fed. The total US credit card delinquency rate is now 3.71%, down 26.0% since 2001 and at its lowest level since early 1995.
Wholesale Inventories for April rose .8% versus estimates of a .4% increase and an upwardly revised .6% increase in March. Stockpiles at US wholesalers rose more than forecast in April, led by machinery and other business equipment. However, sales increased by the most in a year and twice as much as inventories. The inventory-to-sales ratio declined to 1.18 months from 1.19 months in March, the lowest since January, which suggests factories may not need to continue trimming production. Sales of machinery jumped 6.5% in April and were up 17% from the year-earlier month, Bloomberg reported. "Wholesalers in general are experiencing fairly lean inventory levels," said Michael Englund, chief economist at Action Economics.
Initial Jobless Claims for last week fell to 330K versus estimates 333K and 351K the prior week. Continuing Claims fell to 2588K versus estimates of 2591K and 2592K prior. Jobless filings jumped in the prior week because of temporary layoffs in the automobile industry, the government said. The four-week average of jobless claims dropped to 331,750 from 334,500, Bloomberg reported. The claims figures are consistent with much stronger hiring than the unexpectedly small 78,000 gain in May payrolls reported by the Labor Department last week, economists said. The four-week moving average of continuing claims declined to 2.587 million from 2.589 million. Finally, the uninsured unemployment rate, which corresponds with the US unemployment rate, held at 2.0%.
The Trade Deficit for April widened to -$57.0B versus estimates of -$58.0B and a narrower-than-expected -$53.6B in March. The US trade deficit widened as Americans paid more for oil and bought more goods from China. However, US exports hit an all-time record. The number showing March’s deficit was narrower than first reported suggests first-quarter economic growth will be revised higher. "The US trade deficit may finally be stabilizing," said Peter Kretzmer, a senior economist at Banc of America.
The Import Price Index for May fell 1.3% versus estimates of a .4% decline and an upwardly revised 1.2% increase in April. Prices of goods imported into the US declined in May for the first time this year, reflecting a drop in the costs of petroleum, building materials and automobiles. Excluding petroleum, the import price index declined .3%, the largest drop since August 2003. The price of imported building materials fell 3.9% in May after falling 2.0% a month earlier. Steel imports rose 30% during the first quarter versus a year earlier. This is one of the main reasons for the roughly 30% decline in prices for the metal since August of last year. "With these prices under control it reduces the pricing power of domestic manufacturers," said Anthony Chan, senior economist at JP Morgan Asset Managemnent.
The Budget Deficit for May narrowed to -$35.3B versus estimates of -$45.0B and -$62.5B in April. The U.S. budget deficit narrowed to $35.3 billion in May from a year earlier, a larger improvement than expected, as tax revenue soared. This was the smallest May budget shortfall since 2001. The Treasury said that overall tax receipts rose 32% to $152.7 billion during May compared with a year earlier. Moreover, tax receipts from individuals were up 88% from May 2004, the biggest jump since the height of the stock market bubble in 2000. "This reflects the continued growth in the economy and growing profitability," said Patrick Fearon, an economist at AG Edwards. US employers have added almost 2 million jobs in the last 12 months, helping increase tax revenue.
BOTTOM LINE: Overall, last week's economic data were positive. The decline in consumer credit is welcome and has not had a noticeable impact on retail sales so far. The fall in long-term rates since April should boost consumer credit in subsequent months. The decline in the Wholesale Inventory/Sales ratio is a big positive and suggests a stabilization of manufacturing activity. However, cutbacks in US auto production will continue to dampen factory readings for several more months. The decline in jobless claims bodes well for a modestly better employment report for June. I continue to believe the labor market is cooling from more vigorous levels, which should result in a deceleration in unit labor costs over the coming months. This is likely the Fed's main area of concern as most other measures of inflation are already decelerating. The US trade deficit is stabilizing and should improve modestly through year-end. However, any significant improvement is unlikely as the US economy remains much stronger than that of most other industrialized nations. Import prices should continue to moderate through year-end which will help keep inflation in check, but result in less pricing power for US corporations. Rising incomes, low unemployment, a booming housing market and healthy consumer spending should continue to boost Treasury receipts. I expect the 2004 U.S. budget deficit to come in substantially better than the $427 billion forecast by the White House. Long-term interests rates may move a bit higher in the short-run, but yields continue to look lower longer-term as global investors increase US asset exposure, global growth slows, inflation decelerates, the US dollar continues to firm and US deficits improve. Finally, the ECRI Weekly Leading Index rose .68% to 132.90 and is forecasting moderating, but healthy levels of economic activity.
No comments:
Post a Comment