Market Recap: Consumer Credit Expands, JOLTS Increases, Retail Sales Drop

Blog posted On July 14, 2017

This week, mortgage rates started to fall after Federal Reserve Chair Janet Yellen’s remarks at her semiannual testimony before the Senate Banking Committee.  Expectations of a September or December rate hike have dropped.  Consumer credit expanded at the fastest pace in seven months, there were fewer job openings than expected and retail sales declined.

Consumer credit measures the total outstanding credit among revolving and nonrevolving credit.  Revolving credit includes short-term debt like monthly credit card bills.  Nonrevolving credit includes longer-term debt like student debt and auto loans.  The Federal Reserve reported a consumer credit annual growth rate of 5.8% to a level of $18.4 Billion in May.

The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) increased less than expected in May.  The number of vacant positions dropped to 5.7 million, down from April’s figure of almost 6 million open positions.  Hiring increased at the fastest pace since December 2015, with 429,000 more hires month-over-month to a level of 5.4 million.  Voluntary quits exceeded 3.2 million, reaching a post-recession high.  The labor market remains tight.

Retail sales dropped again in June, down 0.2% month-over-month.  Year-over-year, however retail sales are up 2.8%.  The monthly decline was driven by spending drops at food and beverage stores, restaurants, and department stores.  Gasoline sales were also down.  Nonstore retailers, like ecommerce platforms were up and spending on building materials was also positive.  

Expectations for further interest rate hikes this year have started to wane after Yellen’s comments at her semiannual testimony.  She stated, “Because the neutral rate is currently quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance.”  Rates started to drop after the testimony and remain historically low.

Sources: Bloomberg, CNBC, MarketWatch, MarketWatch, Mortgage News Daily, US News and World Report