Economic Advisor

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Last Week’s Economic News in Review April 15, 2015
Student and car loans continued to drive an expansion in consumer borrowing, while lay-offs increased, but remained at low levels, and wholesale inventories grew, signaling possible increased wholesale activity in the near future.

Consumer Credit

Consumer credit grew 5.6 percent in February to hit a total of $3.34 trillion, the Federal Reserve reported last week. This constituted a $15.5 billion increase over the previous month, beating market growth expectations by $3 billion.

Notably, the growth was driven by non-revolving debt, such as car or student loans, which grew by 9.4 percent, or $19.2 billion, to hit a total of $2.45 trillion. This marked the single biggest monthly gain in non-revolving debt since July 2011. Meanwhile, revolving debt, such as credit cards, dropped 5 percent, shrinking to $884 billion.

All in all, consumer credit has grown 6.8 percent in the past year, and much of it has been driven by non-revolving debt. Why? Many economists were attributing some of these gains to the drop in gas prices, which they have surmised has helped foster increased auto sales.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed continued their yo-yo act, this time going up, but remaining well below the 300,000-claim mark. Initial jobless claims filed during the week ending April 4 bounced up to 281,000 claims, a gain of 14,000 claims over the previous week’s revised level of 267,000, according to last week’s report from the Employment and Training Administration.

The four-week moving average, considered a more stable measure of lay-off activity, dropped to 282,250 claims, a decline of 3,000 from the preceding week’s revised average of 285,250. This marked the lowest four-week moving average since June 3, 2000 when it was 281,500. Could this be a sign of continued improvement?

“If claims remain this low, and we think they might even head lower in the coming weeks, it will be hard to claim there is persistent weakness in the labor market,” RBS economist Guy Berger told the Reuters news service.

Wholesale Inventories

Wholesale inventories, an important economic indicators because they measure how much business wholesalers anticipate they will get, grew to $574.0 billion in February, which was 0.3 percent higher than January’s revised level and 6.1 percent larger than February 2014’s level, the Census Bureau reported last week.

Sales for wholesalers dipped to $444.2 billion, a 0.2 percent decline from January, and were down 1.5 percent below February 2014. Key contributors to February’s sales dip were durable goods, which dropped 2.4 percent; electrical and electronic goods, which were down 5 percent; and sales of machinery, equipment, and supplies, which were down 3.4 percent.

February’s wholesale performance put the inventories-to-sales ratio for the month at 1.29. To compare to last year, February 2014’s ratio was 1.20.

This week we can expect:

    • Tuesday — March retail sales and February business inventories from the Census Bureau; March producer price index from the Bureau of Labor Statistics.
    • Wednesday— March industrial production and capacity utilization from the Federal Reserve.
    • Thursday — Initial jobless claims for last week from the Employment and Training Administration; March housing starts and building permits from the Census Bureau.

li>Friday — March Consumer price index from the Bureau of Labor Statistics; March leading economic indicators from The Conference Board.

Omar Khamisa
Mortgage Loan Manager
Mission San Jose Mortgage
3414 Brookside Road
Suite 300
Stockton, CA 95219
Office: 209-651-2000
Cell: 209-910-4675
NMLS: 369325
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Economic Advisor