Last Week’s Economic News in Review


Consumer credit saw limited growth, while lay-offs continued to fall, and wholesale inventories beat market expectations.

Consumer Credit

Consumer borrowing for January increased at 3.6 percent to hit $3.54 trillion according to last week’s news from the Federal Reserve. This was the smallest gain in consumer borrowing since 2013, with the market expecting January’s consumer credit to grow by at least $16.5 billion, rather than the month’s smaller $10.5 billion gain.

January’s growth was driven by non-revolving debt, such as car and student loans, which increased 5.4 percent to $2.6 trillion. Meanwhile, revolving debt, such as credit card transactions, declined 1.3 percent to drop to $935 billion. The drop in credit card use caused some concern among analysts about how this would impact consumer spending, which drives roughly 70 percent of the economy.

Initial Jobless Claims

Layoffs continued to slide, with first-time claims for jobless benefits filed by the newly unemployed during the week ending March 5, falling to 259,000, a solid drop of 18,000 claims from the prior week’s total of 277,000, the Employment and Training Administration reported last week. This was the lowest level since October.

“The labor market continues to be the light shining through the foggy state of the global economy … the recent improvement in a host of economic data should provide a bit of relief that the expansion still has legs,” Jim Baird, chief investment officer at Plante Moran Financial Advisors, told the Reuters news service.

The four-week moving average — considered a more stable measure of lay-off activity — also declined, falling to 267,500, a decrease of 2,500 claims from the preceding week’s total of 270,000.
Wholesale Inventories
Inventories for wholesalers increased 0.3 percent to $584.2 billion in January, and were up 2 percent when compared to January 2015’s inventories, according to last week’s report from the Census Bureau. This outpaced market expectations, which had predicted that wholesale inventories would drop by 0.2 percent.

Wholesale inventories are a key indicator in that they hint at whether wholesalers anticipate increased demand from their retail customers. Greater inventories point to an anticipation that consumer spending will increase. January’s growth was driven largely by motor vehicle and car parts, non-durable goods, and especially paper products and inventories of drugs and pharmacy sundries.

Meanwhile, wholesale sales for January dropped a solid 1.3 percent to $433.1 billion, and were down 3.1 percent from January 2015’s sales levels. This put the January inventory-to-sales ratio for wholesalers at 1.35, meaning it would take 1.35 months for wholesalers to sell off their inventory.

“Wholesale inventory growth has beaten sales growth since mid-2014 to leave a steep inventory-to-sales ratio spike that is usually only seen in recessions,” Action Economics Chief Economist Michael Englund told the New York Times.

This week we can expect:

  • Tuesday — Retail sales for February and business inventories for January from the Census Bureau; producer price index for February from the Bureau of Labor Statistics.
  • Thursday — The consumer price index for February from the Bureau of Labor Statistics; housing starts and building permits for February from the Census Bureau; industrial production and capacity utilization for February from the Federal Reserve.

Friday — Initial jobless claims for last week from the Employment and Training Administration; February leading economic indicators from The Conference Board.