The Federal Reserve Board said that consumer credit rose an annualized 9.7 percent in July, suggesting an increased willingness to take on new debt for the month. Specifically, total consumer credit outstanding was $3.238 trillion at the annual rate in July, up from $3.212 trillion in June. The July figure included $880.5 billion in revolving credit and $2.357 trillion in nonrevolving credit.
The fastest growth continues to be in nonrevolving credit, including auto and student loans. In July, this type of credit increased by an annualized 10.6 percent, a significant acceleration from June’s 8.8 percent rate. At the same time, revolving credit, which includes credit cards and other lines of credit, rose 7.4 percent at the annual rate. This was also a pickup from past months, with 1.8 percent and 6.3 percent annualized growth in the first and second quarters of 2014, respectively. This seems to indicate that more Americans are using their credit cards to make purchases, ending a more cautious approach to borrowing that has been prevalent since the recession.
Job Openings and Labor Turnover Survey
The Bureau of Labor Statistics said that manufacturing job openings declined slightly, down from 302,000 in June to 296,000 in July. Still, June’s figure was a two-year high, and job postings remain higher than earlier in the year. In February (six months earlier), for instance, there were 258,000 job openings in the sector.
The Job Openings and Labor Turnover Survey (JOLTS) data also show a disparity between durable and nondurable goods. Durable goods manufacturers increased the number of job openings for the second straight month, up from 194,000 in June to 201,000 in July. In contrast, nondurable goods firms reduced their postings once again, down from 108,000 to 95,000, pulling the headline figure lower. A similar trend was observed in the hiring data.
Manufacturers hired 259,000 additional employees in July, down somewhat from 268,000 in June. The decrease was the result of reduced hiring for nondurable goods manufacturers (down from 113,000 to 102,000), which was enough to offset a small increase in hiring for durable goods businesses (up from 155,000 to 157,000). At the same time, manufacturing separations—including layoffs, quits and retirements—decreased from 241,000 to 226,000. Overall, net hiring (or hires minus separations) in the manufacturing sector increased from 27,000 to 33,000, illustrating the rebound in hiring seen since the winter and spring months.
In the larger economy, the number of job postings were essentially unchanged (down slightly from 4,675,000 in June to 4,673,000 in July). This continues to reflect significant growth from January’s pace of 3,874,000. Note that the June rate was the highest since February 2007, meaning that those gains were mostly sustained. There were more job postings in July for accommodation and food services, health care, professional and business services and retail trade, in addition to durable goods manufacturers.
NAM/IndustryWeek Survey of Manufacturers
The most recent NAM/IndustryWeek Survey of Manufacturers captured the nuance that we see in much of the market, with a mostly optimistic outlook but also frustration with Washington. Overall, 87.3 percent of respondents were either somewhat or very positive about their own company’s outlook, continuing an upward trend that began in the first quarter of 2013. The underlying data were also encouraging, with many at paces not seen since early 2012. For example, sales are expected to grow 4.4 percent on average over the next 12 months, up from 4.1 percent in the June survey and 2.0 percent in December 2013.
Capital investment and employment also moved in the right direction. Manufacturers plan to increase capital spending by 2.5 percent over the next 12 months, up from 1.4 percent in December and 2.3 percent in June. Meanwhile, 46 percent of survey respondents plan to hire more workers over the next year, with 7 percent anticipating employee declines. On average, firms plan to increase their employee levels by 1.9 percent in the next year, a significant improvement from the lackluster pace of job growth in 2013, which averaged just 0.8 percent.
The current model is very encouraging and suggests that manufacturing production should continue to accelerate, growing 3.1 percent over the next two quarters.
Yet, the top business challenges remain rising health insurance costs and an unfavorable business climate, cited by 77.1 percent and 73.1 percent, respectively, in the survey. In the manufacturing sector, businesses see benefit costs rising an average of 6.3 percent over the next 12 months (a new question starting with this report), with health insurance premiums anticipated to increase 9.6 percent on average in 2015. Respondents were also asked about a number of new labor regulations being proposed by the Administration, and it was clear that there was at least a moderate degree of concern regarding many of these changes.
NFIB Small Business Survey
The National Federation of Independent Business (NFIB) said that small business sentiment ticked higher in August, rising to its second-highest level in seven years. The Small Business Optimism Index increased from 95.7 in July to 96.1 in August. After peaking at 96.6 in May, the index eased somewhat in June, and August’s reading suggests that confidence has once again begun to climb back. Over a longer time frame, it is clear that small business owners have become more positive over the past six months, with the index at just 91.4 in February.
With that said, the underlying data were slightly mixed. On the positive side, the percentage of small business owners with job openings right now increased from 24 percent to 26 percent, continuing an upward trend. Along those lines, the percent planning to make capital expenditures over the next 3 to 6 months rose from 23 percent to 27 percent, its fastest pace since November 2007 (the month before the official start of the recession). On the topic of inflation, pricing pressures have decelerated a bit, with the net percentage of those predicting price increases over the next 3 months declining from 22 percent to 19 percent.
Yet, the report also reflected some soft spots. For instance, sales expectations over the next 3 months dipped from a net percentage of 10 percent to 6 percent. In addition, the percentage suggesting that the next 3 months were a “good time to expand” was off slightly from 10 percent to 9 percent. Nonetheless, the outlook data do reflect an upward trend overall, rising from 6 percent in February. For those saying that it is not a good time for expansion, the top reasons cited continue to be economic conditions and the political climate. Taxes were listed as the “single most important problem” by 24 percent of respondents, followed by government regulations (19 percent), poor sales (13 percent) and labor quality (11 percent).
Retail Sales: After Cautiousness in July, Retail Sales Pick Up in August
The Census Bureau said that retail sales rose 0.6 percent in August, rebounding from a revised 0.3 percent increase in July. The July figure was originally reported as being unchanged. As such, this is a sign that consumer spending has picked up in August after cautiousness over much of the summer. Still, the longer-term trend for retail sales has been mostly favorable, particularly after strong growth this spring, with 3.8 percent growth since December and a 5.0 percent increase year-over-year.
Healthy gains in spending on motor vehicles helped to lift August retail sales, with auto sales up 1.5 percent. It was the second straight increase in auto purchasing levels after being stagnant in June. Year-to-date, motor vehicle sales have risen by a healthy 7.7 percent, or 8.9 percent over the past 12 months.
Beyond autos, consumer spending also increased at decent levels, up 0.3 percent in August or 4.1 percent year-to-date. Therefore, we have seen modest gains for retail sales in the broader market. Excluding autos, other segments with strong increases in retail spending in August included miscellaneous store retailers (up 2.5 percent), building materials and garden supplies (up 1.4 percent), sporting goods and hobbies (up 0.9 percent), electronics and appliances (up 0.7 percent) and furniture and home furnishings (up 0.7 percent).
In contrast, gasoline stations (down 0.8 percent) and department stores (down 0.4 percent) were two areas with softer spending levels for the month. For gasoline stations, the decline stemmed from reductions in petroleum costs, with the price of West Texas intermediate crude falling from $106.07 per barrel on the last day of July to $98.23 a barrel on the last day of August. (It has fallen further since then, closing at $92.15 on Friday.)
Overall, retail sales figures were encouraging. With softer spending levels from May to July, there were worries that cautiousness on the part of the consumer could serve to be a downside risk to the economy moving into the second half of the year. This data suggests that Americans might be loosening up a little in terms of their willingness to spend—a good sign perhaps.
University of Michigan: Consumer Confidence Has Risen Somewhat in September
The University of Michigan and Thomson Reuters said that preliminary data on consumer confidence reflects a slight increase in September. The Consumer Sentiment Index increased from 82.5 in August to 84.6 in September, its highest level since July 2013. These figures suggest that the lull in confidence that we have seen so far this year might finally be starting to dissipate. Prior to the September reading, for instance, the University of Michigan index has averaged just 81.9, and it was little changed since recovering from the budget showdown last fall. In contrast, the Conference Board’s confidence measure has reached pre-recessionary highs in its most recent report.
The subcomponents in the University of Michigan data continue to reflect some anxieties on the part of the consumer. For instance, the index for the current economic environment slipped a bit this month, down from 99.8 to 98.5, even as it represents an improvement from earlier in the year. Americans remain concerned about labor market and income growth, and this is likely responsible for the decline in the present figure. Geopolitical events might also play into this. Still, the future-oriented index rose strongly, up from 71.3 to 75.6, its highest level in over one year, suggesting more optimism moving forward.
We will get final data on September consumer sentiment from the University of Michigan on September 26. The Conference Board will also release its survey data on consumer confidence on September 30.