7/13/2015
By Dominique Paul, Research Analyst

Globally, the International Monetary Fund (IMF) now expects growth of 3.3% year-over-year which is approximately 20 basis points lower than April projections. The downward revision was led by a weaker Q1-2015 than anticipated. During the quarter, global growth was 2.1%, just shy of the 2.9% forecast. For the remainder of the year, growth will be led by advanced economies as there is a slowdown occurring in emerging markets and developing economies. Also, the IMF lowered its United States growth estimates by 60 basis points to 2.5% in 2015. For the year 2016, global growth is projected at 3.8%; and for the US, 2.4%.

The Bloomberg Consumer Comfort Index remained strong at a reading of 43.5% (down 0.5 points) in the week ended July 5^th. However, strong confidence did not translate into the higher consumer spending we were looking for. The Federal Reserve reported that during the month of May, consumer credit rose $16.1 billion, driven by non-revolving credit. Revolving credit and non-revolving credit are components of the Federal Reserve’s monthly credit report. Revolving credit represents the amount of debt consumers take on using credit cards for every day purchases while non-revolving credit represents larger debts taken on that have set interest rates and repayment schedules, such as student and auto loans. Non-revolving credit rose by $14.5 billion to over $381.0 billion. Revolving credit rose by a mere $1.5 billion to $51.5 billion after rising $8.5 billion in April. Consumers may be keeping their wallets shut tight as more workers file for unemployment benefits.

For the week ended July 4^th, initial jobless claims rose a substantial 15,000 to 297,000 after remaining at low levels for several weeks. The 4-week average rose to 279,500 from an upwardly revised 275,000 (from 274,750) in the prior week. It is harder to adjust readings for shortened weeks, so this may be an outlier. Continuing claims, which lag by a week, rose 69,000 to 2.334 million while the 4-week average rose 15,000 to 2.268 million. If the Bureau of Labor Statistics releases a similar report next week, July may end up being a disappointing month in terms of job growth.

Dominique Paul
Wall Street Strategies

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