Trade gap, borrowing on the rise
A higher trade deficit and more consumer borrowing highlighted an otherwise quiet week of economic news—in sharp contrast to the prior week’s drama over the “fiscal cliff” and subsequent compromise on taxes. For the week ended January 11, 2013, the S&P 500 Index was up 0.4% to 1,472. The yield on the 10-year U.S. Treasury note was down 4 basis points to 1.89%.
U.S. trade in the red
The U.S. foreign trade gap widened to $48.7 billion in November as imports, paced by a 27% jump in cell phones and related products, outweighed an unexpectedly weak 1% uptick of exports.
Consumers assume more debt
Consumer borrowing rose in November for the third straight month to a seasonally adjusted $16 billion, fueled by an almost 10% jump in nonrevolving credit, which includes auto financing and student loans. The number represents a 7% annualized increase following a 6% rise in October. Revolving credit, which includes credit card debt, was up more than 1% in November. The figures are considered a key indicator of behavior by consumers, whose spending accounts for about two-thirds of U.S. economic activity.
“Although the reports are from November, strong spending on imported goods and positive consumer credit are both evidence of robust consumer confidence throughout the fourth quarter of 2012, in spite of all the fiscal cliff uncertainty,” said Vanguard senior economist Roger Aliaga-Díaz.
The economic week ahead
Next week’s reports begin Tuesday with producer prices, retail sales, and business inventories. Wednesday features the index of consumer prices, industrial production, and the Federal Reserve Board’s Beige Book. Thursday brings figures on new residential construction.
Source: The Vanguard Group Inc.