Is the USA consumer tapped out and relying more and more on credit?

Apr 8 • Morning Roll Call • 1681 Views • Comments Off on Is the USA consumer tapped out and relying more and more on credit?

shutterstock_126299303There were slightly conflicting and concerning reports published on Monday concerning the USA consumer; firstly consumer credit rose by 6.4% in February mainly for college loans, auto purchases and home mortgages, secondly the amount Americans reported spending each day in March averaged $87 for the month, identical to February.

While spending remains relatively high, this is the first time since the recession that consumers’ average daily March spending didn’t increase at least slightly over February spending. It would appear that once again that the USA consumer is all ‘tapped out’ and relying on credit more and more to survive and in certain instances thrive. This theory would also be held out by the falling savings rates reported recently.

Japan’s central bank will probably double purchases of exchange-traded funds in a second round of monetary easing under Governor Haruhiko Kuroda anticipated in coming months, a Bloomberg News survey of economists’ shows.

Responses to the spring survey by the Bank of Canada suggested that an improving U.S. economy and the recent depreciation of the Canadian dollar, together with firms’ efforts to create new opportunities, are helping to supposing expectations for better growth prospects ahead.

U.S. consumer credit rises 6.4% in February

U.S. consumer credit climbed 6.4% in February, mainly for college loans, auto purchases and home mortgages, the Federal Reserve reported Monday. U.S. consumers increased their debt by a seasonally adjusted annual rate of $16.5 billion, slightly faster than a revised $13.8 billion increase in January. Consumer credit rose 5.3% in January, 7.0% in December and 5.5% in November. Consumer debt has risen every month since August 2011. Non-revolving credit such as federal student loans jumped 10.1%, or $18.9 billion, in February. Credit-card debt fell by 3.4%, or $2.4 billion. That’s the second straight decline in credit-card debt.

BOJ Seen Doubling ETF Purchases in Next Round of Easing

Japan’s central bank will probably double purchases of exchange-traded funds in a second round of monetary easing under Governor Haruhiko Kuroda anticipated in coming months, a Bloomberg News survey of economists’ shows. The Bank of Japan, which tomorrow is forecast to leave unchanged a 60 trillion yen to 70 trillion yen ($674 billion) target for yearly expansion of the monetary base, will increase annual ETF buys to 2 trillion yen in months ahead, according to a survey of 36 analysts. The bank could boost annual bond purchases by at least 10 trillion yen, with July most favoured for a policy move.

BOC Business Outlook Survey

Responses to the spring survey suggest that an improving U.S. economy and the recent depreciation of the Canadian dollar, together with firms’ efforts to create new opportunities, are helping to supposing expectations for better growth prospects ahead. Business reported some improvement in past sales activity and continue to anticipate an increase in sales growth over the next 12 months. Export-oriented firms generally expect sales to gradually strengthen, while those with a more domestic focus often cited efforts to enter new markets or develop new products following weak past sales.

Consumer Spending Stalls in March, No Year-to-Year Growth

The amount Americans reported spending each day in March averaged $87 for the month, identical to February. While spending remains relatively high, this is the first time since the recession that consumers’ average daily March spending didn’t increase at least slightly over February spending. Consumers’ March spending was also no higher than their spending a year ago, which averaged $89. By contrast, in line with the U.S. economic recovery, spending had increased each March between 2011 and 2013, rising from $64 in 2011 to $74 in 2012 and $89 in 2013. These figures are based on Americans’ self-reports of the total amount they spent.

Market overview at 10:00 PM UK time

The DJIA closed down 1.02%, the SPX down 1.08%, the NASDAQ down 1.16%. In Europe the euro STOXX closed down 1.37%, the CAC down 1.08%, the DAX down 1.91% and the UK FTSE 100 down 1.09%. The DJIA equity index future is down 1.09%, SPX future down 1.12% and the NASDAQ down 1.08%. Euro STOXX future is down 1.52%, DAX down 1.88%, CAC down 0.98%, FTSE future down 1.07%.

NYMEX WTI oil finished the day down 0.44% at $100.70, NYMEX nat gas finished up 0.92% at $4.48 per therm. COMEX gold was down 0.45% at $1297.60 per ounce with silver on COMEX down 0.38% at $19.87 per ounce.

Forex focus

The euro rallied 0.3 percent to $1.3742 versus the dollar after as of 5 p.m. in New York. The U.S. currency weakened 0.2 percent to 103.10 yen, while Japan’s currency traded down 0.1 percent to 141.67 yen per euro. The Dollar Spot Index, which tracks the greenback against 10 major counterparts, fell 0.2 percent to 1,014.65 after dropping 0.3 percent on April 4.

The euro gained against 12 of its 16 major counterparts as European Central Bank policy makers signalled deflation risks are contained, subduing speculation of a round of bond-buying to boost prices and economic growth.

Australia’s dollar fell after trading 0.3 percent from a more than four-month high against the greenback after traders cut bearish bets to the least in almost a year. The Aussie declined 0.2 percent to 92.70 U.S. cents from April 4th, when it reached 93.08, the highest since Nov. 21st.

Bonds briefing

The benchmark 10-year yield fell two basis points, or 0.02 percentage point, to 2.70 percent early evening time in New York. The price of the 2.75 percent note maturing in February 2024 added 6/32, or $1.88 per $1,000 face amount, to 100 13/32. The yield reached the lowest level since March 28th. It declined eight basis points on April 4th, the most on a closing basis since March 13th.

Treasuries rose, pushing yields to the lowest level in more than a week, as investors bet jobs growth is slow enough to deter the Federal Reserve from accelerating cuts in its bond-purchase program.

The gap between five- and 30-year yields widened to 188 basis points, touching the most since March 21. It had narrowed to the least since 2009 last month after the Fed signaled that a strengthening economy may prompt policy makers to raise rates sooner than forecast next year.

Fundamental policy decisions and high impact news events for April 7th

Tuesday sees the NAB business confidence survey published which could affect the value of the ASX indices and the value of the Aussie versus its major peers. Japan’s BOJ issues a monetary policy statement and will later in the day hold a press conference to discuss its policy announcements. France’s trade balance is expected to come in at -€5 bn, retail sales from the Swiss should report a rise of circa 1% year on year. Manufacturing production for the UK is predicted to have grown by 0.3%, industrial production for the UK is predicted to have grown by the same value month on month. Housing starts in Canada are predicted to come in at 193K, with building permits to have fallen by circa 2.3% on the month. In the UK a prediction will be made for the GDP of the UK, predicted to come in at 0.8% for the quarter. In the USA the JOLTS business jobs openings are published. Later in the USA the Fed Member Plosser will speak.
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