• Monday, Blood Monday

    Slowed swiping  Consumer borrowing in June expanded at the slowest pace in three months, driven by contracting credit card debt. Revolving credit (like credit cards) fell by 0.1% for the month, after growing 8.4% and 7.6% the two months prior. Non-revolving credit (like auto and student loans) tend to be less volatile and increased at a steady rate by 5.8%.  Moral of the story: Despite the weakness in June, consumer credit for the second quarter expanded by 4.9%, which was 0.6% higher than the expansion we saw in the first quarter. While I like to see consumer debt decline on a personal level, it means consumers are spending less. The…

  • When Doves Cry

    It happened, guys As anticipated, the FOMC cut interest rates for the first time since the financial crisis in 2008. However, the 0.25% cut was categorized by Fed Chairman Jerome Powell as a “mid-cycle adjustment” as opposed to the start of a larger quantitative easing campaign. While markets were initially excited for this rate cut, this signaling from Powell was not what the doves were anticipating and sent stocks tumbling.  Moral of the story: At the end of the day, the Fed will monitor the economy and act as needed to maintain a strong labor market and inflation near 2% (which continued to fall in June). The biggest wildcard is…

  • Holy earnings week, Batman!

    Not a total disaster The first read on second quarter GDP came in at 2.1%, down from the 3.1% growth we saw last quarter. Components of GDP growth tell the tale of two cities we’ve been seeing through other economic indicators. Consumers seems fine as their spending jumped to its highest level in 1.5 years, coming in at 4.3% (from 1.1% last quarter) driven by spending on cars and trucks, food and drinks, and clothing (guilty as charged). Businesses, however, were less optimistic with fixed investments falling 0.8%, the steepest decline in 3.5 years.  Moral of the story: Consumer spending accounts for the majority of GDP growth and it’s still coming in at…

  • Guess who’s back, back again

    *Add to Cart* Retail sales rose for the fourth straight month in June, hopefully indicative of a rebound in consumer spending. Sales increased by 0.4% last month, surpassing economists’ estimates. Gains continued for internet retailers, restaurants, grocers, and home furnishings while department stores continued down the path to their slow and steady demise (insert depressing music here). Sales also fell pretty sharply at gas stations due to falling oil prices. If you normalize results for falling oil prices, retail sales actually would have increased by 0.7% in June.  Moral of the story: It seems like consumer spending has come back after taking a break. Given this is such a large part…

  • Because it’s all about that rate

    If it walks like a duck… The Fed has a dual mandate – keep prices stable and employment high. Inflation (aka pricing pressure) has continuously fallen lower and lower below the Fed’s 2% target rate. Boosting inflation might be rationale for cutting rates in July. But the latest CPI report showed core inflation (a measure that strips out food and energy) jumped up 0.3% compared to the prior month, which is the largest increase in 18 months. Moral of the story: Despite the 18-month-high increase in core CPI, annual prices only increased 2.1%, which is significantly lower than the ~3% number we were recording a year ago. While the Fed uses the PCE…

  • HBD America

    Sitting, Waiting, Wishing Due to the holiday, it’s been a fairly slow week for the markets and most Americans. We started the week with ISM’s June manufacturing index indicating US manufacturers grew at the slowest pace in over two years. Tbh this is not surprising given results from the Philly and New York Feds’ surveys measuring similar activity. The index dropped to 51.7 in June, only 1.7 points away from contractionary territory. The services side of the economy is still showing strength (albeit at the lowest levels in almost two years) with the services index coming in at 55.1 for June.  Moral of the story: Tariffs on Chinese goods and…

  • Let the Games Begin

    Let the Hunger Games Begin  This week we saw the first round of presidential debates and had the pleasure of watching 20 Democratic candidates speak over each other in heated argument over two nights. The top contenders according to polls (if the last presidential election is any indication, these polls are about as trustworthy as my latest Buzzfeed quiz that categorized pea soup as “the most fun”) are Joe Biden, Bernie Sanders (SOS, socialism is not the answer), Pete Buttigieg, Kamala Harris, and Elizabeth Warren. As Democrats identify the candidate best suited to dethrone Trump, dramatic policy changes on immigration, healthcare, and the environment are expected to be quite topical.  Moral of the story: Top contenders’…

  • What in the world??

    Around the world  While the markets were awaiting a decision from the Fed, European Central Bank President Mario Draghi communicated the ECB’s willingness to further its quantitative easing by cutting rates and buying bonds if needed to support the Eurozone economy. Trump responded to this by effectively threatening the Fed to act similarly to buoy the US economy. The Fed is an independent organization and is as likely to respond to these threats as the Kardashians are to giving up social media. Anyway, we also heard positive updates on the China trade front from the G-20 Summit, reviving hopes for some resolution here in the near future. There was also a US drone…

  • Assuaging Concerns

    Persian Gulf Problems  CPI rose a full 0.1% in April as inflation was held in check largely due to a decline in gasoline prices. On Thursday, however, we got news that two oil tankers were attacked in the Strait of Hormuz, escalating fears of potential disruption in the supply of oil, and sending oil prices higher. So, we could see this put some upward pricing pressure on gasoline for the May CPI read. The annual increase fell to 2% from 2.1% last month, and is in line with the Fed’s 2% target.  Moral of the story: The biggest thing that seems to be driving inflation right now is rising rents, but aside from…

  • **cue ominous music**

    Same old, same old  Manufacturing data continue the downward trend that started last fall, which is nothing new at this point, but I mean not ideal. Manufacturing businesses grew at the slowest pace in two and half years (since the month before Trump was elected) in May because, ICYMI, we’re fighting with China. At least it seems like we’ve hit the pause button on the fight with Mexico.   Moral of the story: The ISM Manufacturing index is only 2.1 points away from falling into contractionary territory. China and Mexico are two of our three largest trade partners, so it can’t be a surprise that the manufacturing sector is feeling a little blue. …