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Friday, February 5, 2016

Consumer Credit Grew 7.2 Percent (SAAR) in December

Consumer Credit increased in December at a seasonally adjusted annual rate of 7.2 percent, rising $21.3 billion (compared to $14.0 billion in November) to $3.55 trillion.


Revolving credit rose at an annual rate of 7.5 percent and by $15.4 billion (up from $7.7 billion in November) to $935.6 billion.

Non-revolving credit increased at an annual rate of 7.1 percent and by $5.8 billion (down from $6.4 billion in November) to $2.61 trillion


Federal government holdings of student loans continue to be the largest portion of non-revolving credit, comprising approximately 36 percent of outstanding credit. Depository institutions and finance companies are the secondary and tertiary holders, with 25 percent and 24 percent, respectively, of outstanding non-revolving credit.

Read the Federal Reserve release.
Visit the new Banks and the Economy.

U.S. Foreign Trade Deficit Widened in December

The U.S. international trade deficit widened in December to $43.4 billion, up $1.1 billion from November. The widening of the balance was driven by a $0.5 billion decrease in exports, along with a $0.6 billion increase in imports.


The goods deficit increased $1.3 billion to $62.5 billion, while the services surplus increased $0.1 billion to $19.2 billion.

Exports of goods fell $0.8 billion to $121.2 billion, driven by a $0.6 billion decrease in automotive vehicles and parts, and a $0.4 billion decrease in Industrial supplies and materials. Exports of services increased $0.3 billion to $60.3 billion, as financial services, and other services such as research and development increased.

Imports of goods increased $0.5 billion to $183.7 billion, largely due to a $1.0 billion increase in imports of automotive vehicles and parts. Industrial supplies and materials also increased by $0.5 billion. Imports of services grew $0.1 billion, due to an increase in travel and business services.

Read the Census/BEA release.
Visit the new Banks and the Economy.

Bank Economists See Moderate Growth Despite International Challenges

This year will mark the seventh straight year of expansion for the U.S. economy, a trend that will continue through at least 2017, according to the Economic Advisory Committee of the American Bankers Association. The committee forecasts 2.3 percent growth over the four quarters of this year, followed by 2.2 percent growth next year.

“While the current economic expansion is old compared to the five-and-a-half year average we’ve seen over the last half century, it is in some ways young at heart,” said Carl Tannenbaum, chairman of the group and chief economist of Northern Trust. “Important avenues for growth remain and the financial system is far healthier than it was eight years ago. This means that potential global maladies are unlikely to produce contagion for the U.S. economy.”

The committee, which includes 15 chief economists from among the largest banks in North America, believes the ongoing progress will create jobs and lead wages higher. The group expects that 2.2 million jobs will be added in 2016, pushing wages up 2.5 percent and the national unemployment rate down to a nine-year low of 4.7 percent.

Consumer spending will be a key driver this year, as it was last year, according to the committee. The group forecast is that personal consumption will grow 2.5 percent in 2016 and then 2.1 percent next year.

“Household fundamentals are positive, with impressive job gains, low oil prices and stronger balance sheets,” Tannenbaum said.

Housing will be a pillar of growth this year, according to the group. Residential investment is expected to rise 7.0 percent this year and 4.2 percent next year. Strong fundamentals, along with low mortgage rates, should sustain the recovery in home values, which increased 4.9 percent last year on a nationwide basis and are expected to rise 3.9 percent this year.

The committee’s outlook also calls for business capital investment to support growth this year, increasing 3.5 percent.

Moderating import and commodity prices are expected to drive inflation closer to the Federal Reserve’s target of 2 percent over the next two years, according to the committee.

“Outside of stabilizing oil prices, the improving domestic economy and rising wages could put upward pressure on the price level,” Tannenbaum said. “However, the weak global backdrop and a strong dollar may limit any acceleration of inflation.”

With a modest pick-up in inflation and declining unemployment, the group expects the Federal Reserve to raise its federal funds target zone three times over the course of 2016, from 0.25–0.50 percent at present to 1.00–1.25 percent. Thereafter, the bank economists see a gradual rise in rates over the next several years.

“We see this as a gentle normalization of monetary policy rather than an attempt to curb growth and contain inflation,” Tannenbaum said.

While the consensus calls for sustained growth, the committee sees risks to the outlook as skewed toward the downside.

“The potential threats are largely external, and include faltering emerging markets and related financial risks, which could impair market and economic performance,” said Tannenbaum.

The group’s consensus is that the 10-year Treasury rate will rise from 2.0 percent at present to 2.6 percent at year-end, and mortgage rates will increase from 3.9 percent to 4.2 percent over the same period.

The committee sees sustained strength in the quality and availability of bank loans. Delinquency and charge-off rates will remain near historical lows. Consumer bank credit is expected to grow more than 5 percent and business bank credit more than 8 percent over the course of this year.

“The economy may have challenges to address, but the availability of bank credit is not one of them,” Tannenbaum said.

Read the EAC forecast.

151,000 Jobs Added in January, Unemployment Fell to 4.9 Percent

Total nonfarm payroll employment rose by 151,000 in January, down from last month’s downwardly revised total of 262,000 jobs. The national unemployment rate fell to 4.9 percent.


The services sector added 118,000 jobs, down from 197,000 in January. The majority of new service jobs were in retail sales, which added 57,700. Retail employment rose in general merchandise stores, electronics and appliance stores, and motor vehicles and parts dealers. January’s retail gains help to negate some of the planned retail layoffs announced earlier in the month. Healthcare and social assistance followed with 44,000 new jobs, consistent with last month’s total.

Among goods producing industries, manufacturing posted strong gains, adding 29,000 jobs, an increase from 13,000 in December. Growth in construction employment trailed off, adding 18,000 jobs in January, less than half of December’s total. The mining industry continued to shed jobs, falling by 7,000 in January. Since peaking in September 2014, the industry has lost 146,000 jobs.

The civilian labor force participation rate was little changed at 62.7 percent in December.

The number of long-term unemployed, those jobless for 27 weeks or more, was also unchanged at 2.1 million. The number of discouraged workers, those who gave up looking for work was 623,000, unchanged from a year ago.

Average hourly earnings rose by 12 cents to $25.39 in January. Year-over-year, earnings grew 2.5 percent.

Read the BLS release.
Visit the new Banks and the Economy.

Thursday, February 4, 2016

Bank Economists Forecast Continued Economic Growth Through 2017

The U.S. economy will continue to expand, with growth in 2016 forecast to reach 2.3 percent and diminishing risk from global volatility, the ABA Economic Advisory Committee said yesterday.

The committee of 15 chief economists at some of the nation’s largest banks said the seven-year expansion is “likely to last at least another couple of years,” said EAC Chairman Carl Tannenbaum, chief economist at Northern Trust. “Important avenues for growth remain and the financial system is far healthier than it was eight years ago. This means that potential global maladies are unlikely to produce contagion for the U.S. economy.”

The EAC said it expects growth to continue to create jobs and lead wages higher, projecting 2.2 million new jobs in 2016, which will push wages up 2.5 percent and unemployment down to a nine-year low of 4.7 percent.

“Consumers are in awfully good shape,” said Tannenbaum, noting that personal consumption is projected to grow 2.5 percent in 2016 and 2.1 percent in 2017. The housing market is “gradually finding its footing,” he added, noting that the committee expects low mortgage rates, increasing home values and a projected 7 percent rise in residential investment in 2016 to continue to drive its recovery.

Committee members also echoed the Federal Reserve’s expectations for gradual rate increases over the next several years as inflation and unemployment allow.

Read the ABA release.
Visit the new Banks and the Economy.

Manufactured Goods Orders Fell in December

New orders for manufactured goods fell 2.9 percent to $456.5 billion in December, following a 0.7 percent decrease in December, according to the U.S. Census Bureau. This was the fourth decline in the last five months. Excluding transportation, new orders fell 0.8 percent to $385.3 billion.


New orders for manufactured durable goods fell 5.0 percent to $225.6 billion in December, following a 0.5 percent decrease in November. Transportation equipment led the decrease, as it fell by 12.6 percent to $71.2 billion.

Shipments of manufactured durable goods fell 2.1 percent to $236.1 billion, following a 0.6 percent increase in November. Shipments excluding transportation fell 0.4 percent, compared to a 0.6 percent decline in the previous month. Shipments of nondurable goods fell 0.8 percent on account of weaker petroleum and coal demand.

Read the Census release.
Visit the new Banks and the Economy.

Job Cuts Surge as Retail Downsizes

Employers announced plans to cut 75,114 jobs in January, the highest number of planned layoffs since July 2015, according to a report issued by Challenger, Gray & Christmas. January’s announced cuts were 218 percent higher than December’s total, and 42 percent above the year-ago rate. The planned cuts were led by retailers, which announced nearly 54,000 future layoffs.

“Retail job cuts came on the heels of relatively strong holiday sales, which increased by nearly 8.0 percent. However, a growing portion of the sales gains are occurring online,” said John A. Challenger, CEO of Challenger Gray & Christmas. “At Macy’s for example, November and December sales at its brick-and-mortar stores fell by 5.0 percent, while orders through its online entities were up 25% from a year earlier.”

Walmart led the cuts in retail, announcing plans to close 269 stores, which will impact 16,000 employees. The energy sector also saw significant cuts, with firms announcing plans to reduce employment by 20,246, the highest total since January of 2015.

“With oil prices expected to stay low for the foreseeable future, the potential for continued layoffs remains elevated,” said Challenger.

Read the Challenger Gray & Christmas release.
Visit the new Banks and the Economy.