The Federal Reserve reported that total outstanding consumer credit increased $9.2 billion in April following March’s $12.3 billion increase. On a seasonally adjusted annual rate, consumer credit slowed to a 2.9% pace, down from 3.8% in March.   Consumer debt increased by the smallest amount in the past seven months due to a slowdown in non-revolving credit. 

Non-revolving debt, which includes education and auto loans, increased $7.0 billion after increasing $13.4 billion in the prior month.  Revolving debt, mostly credit cards, increased $2.3 billion (2.6%) after declining $1.1 billion in March.  This is below the 2017 monthly average of 5.9%. When you connect the dots, it looks like auto sales may be slowing after peaking at 18.9 million in September of 2017.       

Rising interest rates may have come into play as consumers seem to be allocating their money more wisely.   Couple this with the household wealth effect (related to rising home prices, which we we talked about in yesterday’s Afternoon Note) and more disposable after-tax income thanks to lower taxes, and the consumer seems to be in good shape to spend and support the economy.  Consumer spending represents approximately 70% of economic growth. 

Wholesale Inventories

Wholesale inventories increased 0.1% in April, slightly better than the estimate of unchanged.

• Auto inventories increased 0.4%
• Petroleum stocks jumped 3.1% 
• Year over year inventories increased 5.8% 
• Wholesale stocks ex-autos, a component of GDP, edged up 0.1% in April. 

The inventories to sales ratio, which measures the amount of time it would take to clear shelves at the current sales pace, was 1.28 months compared to 1.30 in April 2017.

Sales at wholesalers were up 0.8% in April after increasing 0.4% in March.  Year over year, sales were up 7.8%.  Auto sales slipped 0.7%, slightly better than the 1.2% decline in the previous month.   Overall, sales growth surpassed inventories growth. If this continues, ultimately, it should help wholesalers regain pricing power.

Concerns regarding the outcome of this weekend G-7 meeting in Canada has investors sitting on their hands today.  Equites have a bit of a defensive tone as consumer staples are garnering investors’ attention today.  The Dow is in the green and on pace for the best week in over a quarter. Nasdaq and the S&P500 are still in the red. Technology, especially semiconductors are having a rough day on the news that Apple (AAPL) may cut iPhone component orders by 20%.  On the NYSE, advancers outpace decliners 1465/1355, and on the Nasdaq, its almost even with advancers 1354 to 1378 decliners.

Have a great weekend.