NAM: Monday Economic Report

Last week was a quieter one for data releases, but economists still gleaned some important insights. The Federal Reserve Bank released the quarterly “Survey of Senior Loan Officers” for July, which provides a look at the current credit conditions businesses face. The Federal Reserve also released its report on consumer credit, and the Census Bureau released its wholesale trade data for June. The Bureau of Labor Statistics put out the latest Job Openings and Labor Turnover Survey (JOLTS) for June and the Producer Price Index (PPI) and Consumer Price Index (CPI) for July. Finally, the Department of Labor gave a reading of initial unemployment claims for the week ending August 4.

Respondents to the July survey of senior loan officers of domestic banks indicated that they eased their standards and terms on commercial and industrial (C&I) loans to firms of all sizes and kept commercial real estate (CRE) lending standards relatively unchanged. Banks reported stronger demand for C&I loans by small firms and weaker demand for CRE loans. Despite the Federal Reserve’s tightening to date and the expected two more rate hikes this year, it seems that credit conditions for business outside commercial real estate are still easy—as is nonrevolving consumer credit. In Q2, nonrevolving consumer credit increased at a seasonally adjusted annual rate of 5 percent. Revolving credit increased at an annual rate of 4 percent. In June, consumer credit increased at an annual rate of 3 percent, slower than the whole quarter. This could be an early indication of tightening consumer credit conditions, especially in revolving credit.

The JOLTS report addressed data on job openings, hires and separations. In June, job openings were little changed at 6.7 million. Manufacturing job openings increased to 482,000. Over the month, hires and separations were little changed at 5.7 million and 5.5 million, respectively. However, in the past 12 months, hires totaled 66.6 million and separations totaled 64.1 million, yielding a net employment gain of 2.5 million.

Even though prices have begun to tick up, the inflationary situation remains benign. The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in July on a seasonally adjusted basis after rising 0.1 percent in June. Over the past 12 months, the all items index rose 2.9 percent before seasonal adjustment. The index for shelter, or owner imputed rent, rose 0.3 percent in July and accounted for nearly 60 percent of the seasonally adjusted monthly increase in the all items index. The food index rose slightly in July, and the energy index fell 0.5 percent. The index for all items less food and energy (i.e., the “core”) rose 0.2 percent in July, the same increase as in May and June. The seasonally adjusted PPI for final demand was unchanged in July. Final demand prices had increased 0.3 percent in June and 0.5 percent in May. On an unadjusted basis, the final demand index increased 3.3 percent for the past 12 months. The index for final demand less food, energy and trade services moved up 0.3 percent in July, the same as in June. For the 12 months ended in July, prices for final demand less food, energy and trade services climbed 2.8 percent. The Federal Reserve is likely to stay the course of two more 25bps rate hikes this year.

This week, unlike the last, is rich with data releases, including the NFIB Small Business Survey, industrial production, housing starts and permits and the University of Michigan Surveys of Consumer Sentiment, among others.

Arun Raha, Ph.D., CBE
Vice President and Chief Economist
Eaton Corporation