March 10, 2017
It's Friday and that means it's time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don't worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let's take a look at this week's big headlines:
The Commerce Department reported that factory goods orders jumped 1.2% in January, thanks to a 6.6% surge in industrial machinery orders. Even when you exclude the strong transportation sector, factory goods orders rose 0.3% in January. Factory goods orders have now increased six of the last seven months, so it doesn't look like the strong U.S. dollar is dampening demand for factory goods.
In January, the U.S. trade deficit surged 9.6% to the highest level since 2012. January exports climbed to $127.95 billion (up from $126.9 billion in December) and January imports jumped to $197.64 billion (up from $192.56 billion in December). This is concerning because the trade deficit can negatively impact GDP growth.
In fact, the trade deficit reduced annual U.S. GDP growth by 1.7% in the fourth quarter. As a result, there are rising concerns that an even bigger trade deficit in the first quarter could potentially take up to a 2% bite out of overall GDP growth. The Atlanta Fed has already reduced its first-quarter GDP estimate to 1.3%, down from a previous forecast of 2.5% annual GDP growth.
In January, consumer borrowing rose at the slowest pace since August 2011. Consumer debt increased by $8.8 billion, or at a 2.8% seasonally adjusted annual rate. This was much less than the $15.0 billion increase expected by analysts. Meanwhile, December's consumer debt was revised up to reflect a $14.8 billion increase, compared with the previously reported $14.2 billion increase. The main drag on January consumer credit was a 4.6% drop in revolving credit, which is predominantly credit card debt.
January's wholesale inventories fell by 0.2%, the largest such drop since February 2016. As a refresher, inventories rose 1.0% in December, so somewhat of a pullback was expected. However, this was a steeper-than-expected drop as economists were looking for a 0.1% dip. Sales fell 0.1% in January compared with a 2.4% gain in December. This slowdown in demand will likely cause wholesalers to keep a tighter rein on stockpiles in the coming months.
On Wednesday, ADP reported that private payrolls increased by 298,000 in February, crushing economists' estimates for a 185,000 gain. January's private payrolls were also revised higher to 261,000, up from the previously reported 246,000. So far in 2017, private job creation is running at its strongest pace in 10 years.
Then this morning, the Labor Department announced that 235,000 jobs were created in February, which also topped estimates for 221,000 jobs. The unemployment rate dropped to 4.7% last month, down from 4.8% in January. And average hourly wages increased by $0.06, or 0.2%. Overall, the February payroll report was relatively in line with economists' expectations.
That's all I have for you this week; I'll be in touch again next week with the latest ratings updates out of Portfolio Grader.
Have a great weekend,