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Friday, February 12, 2016

Retail Sales Rose 0.2 Percent in January

There were $449.9 billion of retail and food service sales in January (after adjustment for seasonal variation and holiday and trading-day differences, but not for price changes), up 0.2 percent from December, and 3.4 percent above January 2015, according to the U.S. Census Bureau.



Core retail sales – excluding automobiles and parts – increased 0.1 percent last month, consistent with December. Year-over-year sales excluding automobiles and parts increased 2.5 percent. Retail trade sales were up 0.3 percent on the month, and 3.1 percent on the year.

Sales at gasoline stations declined 3.1 percent from the previous month and 8.1 percent from the previous year. Sales at motor vehicle and parts dealers increased 0.6 percent from December and 6.9 percent from January 2015.

Read the Census release.
Visit the new Banks and the Economy.

Wednesday, February 10, 2016

Yellen: Conditions Less Supportive of Growth

In a hearing before the House Financial Services Committee, Chair Yellen reiterated that the Fed intends to raise rates gradually, while also noting that financial conditions have deteriorated some.

“Financial conditions in the United States have recently become less supportive of growth, with declines in broad measures of equity prices, higher borrowing rates for riskier borrowers, and a further appreciation of the dollar. These developments, if they prove persistent, could weigh on the outlook for economic activity and the labor market.”

In her prepared remarks, the chair noted that foreign developments pose a risk to growth, as changes in the renminbi exchange rate have led to increased global volatility.

The chair also faced several questions from members regarding whether the Fed would consider implementing negative interest rates in the future, and whether or not they have the authority to do so. Yellen stated that the option was explored during 2010, but needs to be explored further. She does not know of any legal restrictions for implementing negative rates and also noted that it would not be a preferred tool.

Read Chair Yellen’s statement here.

Tuesday, February 9, 2016

Small Business Optimism Slipped in January

The NFIB Small Business Optimism Index fell 1.3 points to 93.9 in January. Three of the ten index components posted gains on the month, while six components declined.


Labor market conditions weakened some but remained healthy, as 52 percent of small businesses reported hiring or trying to hire, compared to 55 percent in December. Forty-five percent of employers reported few or no qualified applicants for available positions. A seasonally adjusted net 11 percent of employers plan to create new jobs, down 4 points from the previous month.

The percent of owners reporting higher sales in the past three months fell to a net negative 7 percent, down 2 points from December. Twelve percent of small business owners reported weak sales as their top business problem, up 1 point from December.

Capital spending slowed as well, with 61 percent of businesses reporting capital outlays, down 1 point on the month. The percent of owners planning outlays in the next 3-to-6 months was unchanged at 25 percent.

Credit conditions remained satisfactory, as 3 percent of owners reported that all their borrowing needs were unmet. Fifty percent of respondents explicitly stated that they did not want a loan, down 2 points from December. Just 2 percent of owners cited financing as their top business problem, compared to 5 percent during the great recession.

Read the NFIB release.
Visit the new Banks and the Economy.

Friday, February 5, 2016

Consumer Credit Grew 7.2 Percent (SAAR) in December

Consumer Credit increased in December at a seasonally adjusted annual rate of 7.2 percent, rising $21.3 billion (compared to $14.0 billion in November) to $3.55 trillion.


Revolving credit rose at an annual rate of 7.5 percent and by $15.4 billion (up from $7.7 billion in November) to $935.6 billion.

Non-revolving credit increased at an annual rate of 7.1 percent and by $5.8 billion (down from $6.4 billion in November) to $2.61 trillion


Federal government holdings of student loans continue to be the largest portion of non-revolving credit, comprising approximately 36 percent of outstanding credit. Depository institutions and finance companies are the secondary and tertiary holders, with 25 percent and 24 percent, respectively, of outstanding non-revolving credit.

Read the Federal Reserve release.
Visit the new Banks and the Economy.

U.S. Foreign Trade Deficit Widened in December

The U.S. international trade deficit widened in December to $43.4 billion, up $1.1 billion from November. The widening of the balance was driven by a $0.5 billion decrease in exports, along with a $0.6 billion increase in imports.


The goods deficit increased $1.3 billion to $62.5 billion, while the services surplus increased $0.1 billion to $19.2 billion.

Exports of goods fell $0.8 billion to $121.2 billion, driven by a $0.6 billion decrease in automotive vehicles and parts, and a $0.4 billion decrease in Industrial supplies and materials. Exports of services increased $0.3 billion to $60.3 billion, as financial services, and other services such as research and development increased.

Imports of goods increased $0.5 billion to $183.7 billion, largely due to a $1.0 billion increase in imports of automotive vehicles and parts. Industrial supplies and materials also increased by $0.5 billion. Imports of services grew $0.1 billion, due to an increase in travel and business services.

Read the Census/BEA release.
Visit the new Banks and the Economy.

Bank Economists See Moderate Growth Despite International Challenges

This year will mark the seventh straight year of expansion for the U.S. economy, a trend that will continue through at least 2017, according to the Economic Advisory Committee of the American Bankers Association. The committee forecasts 2.3 percent growth over the four quarters of this year, followed by 2.2 percent growth next year.

“While the current economic expansion is old compared to the five-and-a-half year average we’ve seen over the last half century, it is in some ways young at heart,” said Carl Tannenbaum, chairman of the group and chief economist of Northern Trust. “Important avenues for growth remain and the financial system is far healthier than it was eight years ago. This means that potential global maladies are unlikely to produce contagion for the U.S. economy.”

The committee, which includes 15 chief economists from among the largest banks in North America, believes the ongoing progress will create jobs and lead wages higher. The group expects that 2.2 million jobs will be added in 2016, pushing wages up 2.5 percent and the national unemployment rate down to a nine-year low of 4.7 percent.

Consumer spending will be a key driver this year, as it was last year, according to the committee. The group forecast is that personal consumption will grow 2.5 percent in 2016 and then 2.1 percent next year.

“Household fundamentals are positive, with impressive job gains, low oil prices and stronger balance sheets,” Tannenbaum said.

Housing will be a pillar of growth this year, according to the group. Residential investment is expected to rise 7.0 percent this year and 4.2 percent next year. Strong fundamentals, along with low mortgage rates, should sustain the recovery in home values, which increased 4.9 percent last year on a nationwide basis and are expected to rise 3.9 percent this year.

The committee’s outlook also calls for business capital investment to support growth this year, increasing 3.5 percent.

Moderating import and commodity prices are expected to drive inflation closer to the Federal Reserve’s target of 2 percent over the next two years, according to the committee.

“Outside of stabilizing oil prices, the improving domestic economy and rising wages could put upward pressure on the price level,” Tannenbaum said. “However, the weak global backdrop and a strong dollar may limit any acceleration of inflation.”

With a modest pick-up in inflation and declining unemployment, the group expects the Federal Reserve to raise its federal funds target zone three times over the course of 2016, from 0.25–0.50 percent at present to 1.00–1.25 percent. Thereafter, the bank economists see a gradual rise in rates over the next several years.

“We see this as a gentle normalization of monetary policy rather than an attempt to curb growth and contain inflation,” Tannenbaum said.

While the consensus calls for sustained growth, the committee sees risks to the outlook as skewed toward the downside.

“The potential threats are largely external, and include faltering emerging markets and related financial risks, which could impair market and economic performance,” said Tannenbaum.

The group’s consensus is that the 10-year Treasury rate will rise from 2.0 percent at present to 2.6 percent at year-end, and mortgage rates will increase from 3.9 percent to 4.2 percent over the same period.

The committee sees sustained strength in the quality and availability of bank loans. Delinquency and charge-off rates will remain near historical lows. Consumer bank credit is expected to grow more than 5 percent and business bank credit more than 8 percent over the course of this year.

“The economy may have challenges to address, but the availability of bank credit is not one of them,” Tannenbaum said.

Read the EAC forecast.

151,000 Jobs Added in January, Unemployment Fell to 4.9 Percent

Total nonfarm payroll employment rose by 151,000 in January, down from last month’s downwardly revised total of 262,000 jobs. The national unemployment rate fell to 4.9 percent.


The services sector added 118,000 jobs, down from 197,000 in January. The majority of new service jobs were in retail sales, which added 57,700. Retail employment rose in general merchandise stores, electronics and appliance stores, and motor vehicles and parts dealers. January’s retail gains help to negate some of the planned retail layoffs announced earlier in the month. Healthcare and social assistance followed with 44,000 new jobs, consistent with last month’s total.

Among goods producing industries, manufacturing posted strong gains, adding 29,000 jobs, an increase from 13,000 in December. Growth in construction employment trailed off, adding 18,000 jobs in January, less than half of December’s total. The mining industry continued to shed jobs, falling by 7,000 in January. Since peaking in September 2014, the industry has lost 146,000 jobs.

The civilian labor force participation rate was little changed at 62.7 percent in December.

The number of long-term unemployed, those jobless for 27 weeks or more, was also unchanged at 2.1 million. The number of discouraged workers, those who gave up looking for work was 623,000, unchanged from a year ago.

Average hourly earnings rose by 12 cents to $25.39 in January. Year-over-year, earnings grew 2.5 percent.

Read the BLS release.
Visit the new Banks and the Economy.