* Consumer credit surged by $19.3 billion in December, the second consecutive solid monthly increase reflecting growth in credit cards, student loans and car loans.
* Weekly first-time jobless claims fell by 15k to 358k and the Job Openings and Labor Turnover Survey showed the number of job openings in December rose 2.5 percent.
* Data on international trade show the nominal U.S. trade deficit widened 3.7 percent to $48.8 billion in December from $47.1 billion in November.
Light Week for Data, but the Economy is Still Improving
Despite headlines dominated by the Eurozone sovereign debt crisis, the flow of economic releases in the U.S. this week was fairly light and continued to reflect an economy growing at a moderate pace. One sign the economy continued to improve was the recently-released data on consumer credit. Consumer credit surged by $19.3 billion in December, the second consecutive solid monthly increase. The growth in credit continued to reflect increases in credit cards, student loans and car loans.
Indeed, nonrevolving credit rose at an 11.8 percent seasonally adjusted pace to $1697.3 billion in December. Demand in student loan credit may be getting a boost from many banks now offering fixed-rate student loans with historically low interest rates. Student enrollment also increased as discouraged workers returned to school, but with many universities boosting tuition and cutting back on aid, students are likely seeking additional financial support. Another boon for nonrevolving credit is car loans. We continue to expect manufacturer unit sales to dealers to increase in the coming quarters. Revolving credit also increased, but the trend is likely not sustainable as credit card use will probably trail off. As consumers contend with a lack of real income growth and decline in the saving rate, consumer spending is expected to increase at only a moderate pace over the next few years.
The labor market is also showing strength, as initial jobless claims are now below the 400k threshold for 12 out of the last 14 weeks. Initial jobless claims fell to 358k for the week ending Feb. 4. On a trend basis, the four-week moving average fell by 11k to 366k. While claims are moving in the right direction, the underlying structural issues in the labor market will likely keep the unemployment rate elevated for the foreseeable future.
That said, the Job Openings and Labor Turnover Survey (JOLTs) showed the number of job openings in December rose 2.5 percent, as openings in manufacturing and professional and business services led the way. The ratio of unemployed job seekers to the number of job openings fell to 3.9 in December from 4.3 in November. Although JOLTs data do not show the same pace of improvement as the nonfarm employment report or initial jobless claims, it still illustrates sustainable gains in the labor market.
Data on international trade show the nominal U.S. trade deficit widened 3.7 percent to $48.8 billion in December from $47.1 billion in November. Exports rose only 0.7 percent while imports rose 1.3 percent. Based on the BEA's conservative estimate for trade, however, we now expect trade to make a modest contribution to economic growth in the fourth quarter. The NFIB Small Business Optimism Index increased 1.8 points to 93.8 in December, the fourth monthly gain. Also reflecting the elevated unemployment rate, the number of firms with plans to hire pulled back 1.0 percent on the month. One positive aspect of the report was the number of firms expecting real sales to increase did indeed continue to rise. http://thefasttracktrader.us/