My Mortgage Blog

Mortgage Market Update 10-15-2014

October 15th, 2014 11:55 AM by Nick Rapplean

The pace of consumer credit growth slowed, while initial jobless claims hit an eight-year low, and wholesale sales saw an unexpected drop.

Consumer Credit

Consumer borrowing for August grew 5 percent to $3.24 trillion, according to last week’s report from the Federal Reserve. While consumer credit was still growing, the pace had slowed to its lowest level since November 2013, and the month’s total growth of $13.5 billion was well below market expectations of $20 billion.

The big driver for Augusts’ lackluster scores was poorly performing credit cards. Revolving debt, such as credit cards, decreased by 0.3 percent to $880.3 billion, while non-revolving debt, such as student or car loans, grew 7 percent to $2.36 trillion.

While the slowdown was disappointing, it’s no reason to go running to the hills. A single monthly report doesn’t represent a trend, reminded Matt Schulz, senior industry analyst for CreditCards.com.

“Maybe what we’re seeing is consumers taking a little bit of a break after going on a nice little shopping spree over the last five months,” Schulz told the Los Angeles Times. “You want a certain amount of growth to indicate they’re confident and to keep the economy humming, but there’s that delicate balance of “Do people have too much debt?”

“The remaining challenge now is to ensure that the rising tide that we clearly see lifts all boats,” Labor Secretary Thomas Perez told the Post.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending Oct. 4, dropped to 287,000, a decrease of 1,000 claims, from the prior week’s revised level of 288,000, the Employment and Training Administration reported last week. This pushed initial jobless claims to their lowest level since February 2006.

“With the pace of firings exceptionally low, and surveys signaling robust hiring, we have to expect very strong payroll growth,” Pantheon Macroeconomics chief economist Ian Shepherdson told the Wall Street Journal.

The four-week moving average, which is considered to be a more reliable measure of recent unemployment activity, fell to 287,750, a decline of 7,250 from the preceding week’s revised average of 295,000. This too was the lowest level for the average since February 2006.

Wholesale Inventories

Sales for merchant wholesalers, except manufacturers’ sales branches and offices, dropped 0.7 percent in August to reach $453.9 billion, the Census Bureau reported last week. While the drop was unexpected, wholesale sales were 5.8 percent higher than August 2013.

Some notable wholesale segments were durable goods, which ticked up 0.1 percent; nondurable goods, which dropped 1.3 percent; metals and minerals, which grew 1.6 percent; petroleum and petroleum products, which dropped a considerable 4.2 percent; and sales of farm product raw materials, which fell 3.8 percent.

That sales slowdown helped push total inventories for merchant wholesalers to $538 billion in August, marking a 0.7 percent drop from July. This put the August inventories-to-sales ratio for wholesalers at 1.19, which was not significantly different than the August 2013 ratio of 1.16.

Posted in:General

Posted by Nick Rapplean on October 15th, 2014 11:55 AM

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Mortgage Market Update 10-15-2014

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