July 14th, 2021
Wholesale inventories grew more than expected, as did consumer credit. Meanwhile, layoffs rose a bit.
Wholesale inventories rose to $709.8 billion at the end of May, which marked a 1.3 percent gain over April, the Census Bureau reported last week. This was better than the 1.1 percent growth economists had expected for the month, and when compared to the same period a year ago, May’s inventories were 8.2 percent over May 2020.
Wholesale inventories are an important indicator to monitor because they indicate wholesalers’ anticipation of increased demand from the retail sector. That, in turn, is important because consumer spending drives roughly 70 percent of all U.S. economic activity.
Some key categories that helped drive April’s inventory expansion included lumber, which grew 7.6 percent for the month; miscellaneous non-durable goods, which were up 4 percent; apparel, which expanded 2.4 percent; metals, which also rose 2.4 percent; and pharmaceuticals, which increased 2.3 percent.
Meanwhile, wholesale sales increased to $576.5 billion in May, which was 0.8 percent over April. Compared to the same period last year, May’s wholesale sales were up 36.8 percent over May 2020’s sales.
April’s inventory-to-sales ratio widened slightly to 1.23 from May. A growing ratio can mean declining demand for wholesale goods or stockpiling high-value durable goods, such as lumber, which is seeing historic price increases.
Consumers whipped out their credit cards more frequently in May, pushing consumer credit higher than expected for the month.
Total consumer borrowing rose to $4.279 trillion during May, which was 0.82 percent over April’s total outstanding of $4.244 trillion, the Federal Reserve reported last week. May’s $35 billion increase was nearly double the $18 billion gain that analysts had expected for the month.
Non-revolving debt, such as student and car loans, increased to $3.304 trillion in May from April’s figure of $3.278 trillion. Revolving debt, which is mainly credit card spending, climbed to $974.6 billion in May, from April’s total of $965.4 billion.
The growing willingness to use credit cards points to increased confidence on the part of consumers to take on more debt, which will hopefully lead to more gains in consumer spending.
Initial Jobless Claims
First-time claims for unemployment benefits filed by recently unemployed Americans during the week ending July 3 rose to 373,000, which was 2,000 claims above the preceding week’s revised total of 371,000, the Employment and Training Administration reported last week.
The four-week moving average – regarded as a more reliable measure of jobless claims – ticked up to 394,500 claims, which was 250 claims over the previous week’s revised average of 394,750. This brought the four-week average to its lowest level since March 14, 2020, when it was at 225,500.
“While the pace of firings is still above the 200,000 range we saw pre-COVID, it actually is only slightly above the average seen in the expansion in the mid [2000s] where from 2003 to 2008 it averaged 335,000,” Bleakley Advisory Group Chief Investment Officer Peter Boockvar noted in a public statement.
This week, we can expect:
Tuesday – Consumer prices for June from the Bureau of Labor Statistics; the federal budget for June from the Treasury Department.
Wednesday – Producer prices for June from the Bureau of Labor Statistics.
Thursday – Initial jobless claims for last week from the Employment and Training Administration; import prices for June from the Bureau of Labor Statistics; industrial production and capacity utilization for June from the Federal Reserve.
Friday – Retail sales for June and business inventories for May from the Census Bureau; consumer sentiment for July from the University of Michigan Surveys of Consumers.
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