U.S. Consumer Credit RetrenchmentEases

Consumers have backed away from reducing debt as rapidly as during last year. The Federal Reserve reported late-Friday that consumer credit outstanding rose $2.0B during March following a revised $6.0B February drop. That decline was half the amount reported last month, suggesting that consumers are more confident about spending. Despite this seeming stabilization in credit outstanding, the 3.4% y/y decline ending in March remained a near record. 

Cutting the usage of revolving credit remained in the forefront of consumers' pullback. A $3.2B March decline followed a $6.0B drop and left usage down a near-record 8.8% y/y. Pools of securitized assets led with a sharp m/m (-84.7% y/y drop. Finance companies, however, countered and increased lending 29.3% y/y due to a one month March spike. Commercial bank lending also jumped in March and was up by three- quarters from last year.  Loans from credit unions rose 6.2% y/y while lending by savings institution increased 4.7%.

Usage of non-revolving credit (autos & other consumer durables), which accounts for nearly two-thirds of the total, actually rose $5.2B after the $0.2B February slip. Non-revolving credit had fallen modestly during the recession, but has been relatively stable for a year.  Year-to-year figures ending in March show that Federal government & Sallie Mae lending expanded by nearly three-quarters while commercial bank lending also rose 6.6%. These gains were offset a nearly one-half decline in pools of securitized assets, a 12.9% fall in savings institutions, a 4.3% decline in finance companies and a 3.1% fall in credit union lending.

During the last ten years, there has been a 60% correlation between the y/y change in credit outstanding and the change in personal consumption expenditures.  Moreover, these figures are the major input to the Fed's quarterly Flow of Funds accounts for the household sector.

Credit data are available in Haver's USECON database. The Flow of Funds data are in Haver's FFUNDS database. 

The newspaper, word-of-mouth, and personal contacts each are tools for job-searching. In this the internet age, however, postings of available jobs can also be found online. Monster.com, provided by Monster Worldwide Inc., is a web-site which keeps track of many job listings. The monthly figures are available by Census region, industry, and by occupation. Haver Analytics carries Monster's data back to 2003 in its SURVEYS database.

Since its inception, the three-month change in the Monster index has a 68% correlation with growth in nonfarm payrolls.

Keep in mind that 2003-04 = 100 is the base for the Monster Index. From the end of the last recession until this past January, it has stayed in a range from 114 to 121. Most recently, however, it's broken from that range -- to the upside. The April figure of 133 was the strongest in the last three months of improved readings. Moreover, the figure was up 16.7% from its trough. For the most part, double-digit gains have been logged across most of the U.S. Only two regions are substantially lagging with single-digit readings in the Mountain and in the East-South-Central areas.

By industry, recent improvement also has been broad-based with strong double-digit growth in the construction, manufacturing and retail trade sectors. Job openings in the white-collar finance & insurance, management and professional, scientific/tech services industries also have grown at double-digit rates. Jobs availability in health-care and education have grown at slower rates.

Looking once again at the overall level since 2003 shows variation in industry postings. A level of 133 in the total indicates that since inception, there has been a one-third rise in on-line advertising for overall employment. That reflects a range of near-doubling of listings for construction and government jobs to a halving of listings for positions in finance & insurance.

After a jackrabbit jump the OECD trend restored Leading Economic indicators are slowing their pace. Still, viewed over six months which is the OECD’s preferred way of using them, the grow rates across the OECD region remain quite strong, Japan is even accelerating to the second best growth rate in the table. Still, all rates decay over three-months compared to six months.

The challenge to growth, however, is for the period ahead. Evidence is that China is slowing. The Greek crisis and its knock-on effects damaged Europe and have more permanently helped to re-shape Europe’s political power structure.

Now a new support package is in place for Greece and a one trillion dollar backstop for Europe’s laggards has been set up. The ECB is supporting this with bond purchases and the Fed has reactivated its swap lines to help. How much will these new actions compensate for the damage that came before them? How weak will China actually be? And how much if at all will the US economy and its financial markets be damaged by its one-off (?) intra-day thousand point drop in the DJIA from last week? Investing dollars, yen and euros want to know.

As of March things look good across the OECD area. The most up-to-date economic data from the US have been very upbeat. Europe’s most recent readings have been good as well, but the new investor confidence reading from Sentix turned sharply and decisively into negative territory.

Nonetheless it’s a good thing to have the economies hit by these adverse forces while they are gaining momentum. All the trends will bear watching. Upward momentum bolstered with these new pushes by policymakers yet may carry the day.

The European Union, the IMF and the European Central Bank agreed today on a package of emergency measures that are intended to stabilize financial conditions in the Eurozone.  Government deficits and rising debt, particularly in Greece threatened the stability of the Euro Area.  By last Friday, the euro was down to $1.2746 a decline of almost 16% from the high of $1.512 reached on December 3rd of last year. In addition to uncertainty in Greece there were fears that other countries, notably Portugal, Spain and Ireland would be next in line. The continuation of the Euro Area was in question.  The success of the rescue plan will not be known for some time, however, the initial response of the financial markets has been positive. The euro has risen almost 2% today and stock markets around the world are up sharply.

Data for the sixteen countries in Euro Area and the eleven other countries that make up  the European Union are available in the Haver Data base--EUROSTAT.  To illustrate the seriousness of the problems confronting Greece, Portugal, Spain and Ireland we have attached two charts.  The first shows the government deficit as a percentage of Gross Domestic Product on an annual basis.  In 2009, and conditions have probably worsened since the, the government deficit as a percent of GDP was 9.4% in Portugal, 11.2% in Spain, 13.6% in Greece and even higher at 14.3% in Ireland.   It should be noted that among the convergence criteria for membership in the Euro Area, the deficit as a percentage of GDP was expected to be no higher than 3%.  Even allowing for occasional shortfalls, the 2009 percentages are alarming.  As shown in the chart and the  table below, the deficit as a percentage of GDP for Greece has been consistently above the 3% level.

The second chart showing government debt as a percentage of GDP tells a similar story. (These data are quarterly.)  Government Debt in Portugal was 73.7% of GDP in the third quarter of last year.  In Spain it was 49.7%, in Ireland, 62.25 and in Greece,113.2%.  In this case, Spain's debt as a percentage of GDP is below the convergence criterion of 60%.  In Portugal and Ireland the debt to GDP percentages are not too far above the 60% standard, but in Greece, the percentage is almost double the standard and has been close to 100 over the past two years.