My Mortgage Blog

Mortgage Market Update 09-18-2013

September 18th, 2013 10:46 AM by Nick Rapplean

Borrowing by Americans continued to expand in July, but not at the rate for which experts had hoped. The Federal Reserve reported last week that consumer credit grew by an annual rate of 4.25 percent in July to hit $2.85 trillion, a $10.4 billion gain that fell short of the anticipated $13 billion growth.

Once again, non-revolving debt, such as car and school loans, comprised the lion’s share of July’s gain, growing at an annual rate of 7.5 percent from $1.99 trillion to $2 trillion. Meanwhile, revolving debt, such as credit cards decreased at an annual rate of 2.5 percent to $849.8 billion from June’s $851.6 billion.

Almost going hand-in-hand with July’s so-so gains in consumer credit, the Census Bureau reported last week that retail and food services sales for August, only grew by 0.2 percent to $426.6 billion, and were only 4.7 percent over August 2012’s sales. Economists had expected at least a 0.4 percent gain over July.

The key mover in August’s retail sales were motor vehicle dealers and parts sales, which grew by 0.9 percent, and auto dealer sales in specific, which grew by 1 percent. (Car sales would follow logically from July’s gains in non-revolving debt, which includes car loans.) Conversely, sales of more “consumable,” smaller-ticket items flagged. For example, building and garden supply sales were down 0.9 percent; clothing sales contracted by 0.8 percent; sporting goods were down 0.5 percent; and general merchandise sales saw a 0.2 percent dip.

Shifting to the opposite side of the economy, the Producer Price Index for finished goods rose 0.3 percent in August, with food and gas being the key drivers, the Bureau of Labor Statistics reported last week. The index for finished energy goods grew by 0.8 percent in August, with most of the advance can be traced to gasoline prices, which climbed 2.6 percent. Prices for finished consumer foods notched up 0.6 percent in August with prices for fresh and dry vegetables shooting up a whopping 26.9 percent.

While consumer credit, retail sales and producer prices showed mediocre performance, there was some optimistic news in employment: First-time claims for unemployment insurance filed in the week ending Sept. 7, dropping to 292,000, a decrease of 31,000 claims from the previous week's unrevised figure of 323,000, the Employment and Training Administration reported last week.

This was the lowest level of initial jobless benefits since April 2006, but it should be noted that the contraction was at least partially artificial given that the period included Labor Day, and work on computers systems in two states (unidentified by the Labor Department) threw off totals for the period. Looking at a longer period, the four-week moving average for first-time claims dipped to 321,250, a decline of 7,500 from the previous week's revised average of 328,750.

The total number of unemployed Americans covered by unemployment insurance for the week ending Aug. 31 fell to 2,871,000, a drop of 73,000 from the preceding week's revised level of 2,944,000, the Administration also reported. The four-week moving average for the total population dropped to 2,953,000, a decrease of 24,750 from the previous week's revised average of 2,977,750.

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Posted by Nick Rapplean on September 18th, 2013 10:46 AM

My Mortgage Blog

Mortgage Market Update 09-18-2013

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