Last Friday, the latest consumer credit results for December were released showing an overall increase of $14.7 billion against the consensus estimate of $15 billion. While non-revolving credit, which consist mostly of student and auto loan debt, came in at $8.98 billion, the pace of growth slowed considerably. Overall, the fourth quarter 5.4% increase was the slowest pace since Q4-2013.
It’s backwards looking, but points to sentiment shifts for this year. The $5.8 billion increases in credit card debt were the largest since April, underscoring what we heard from credit card companies. The idea that consumers are spending again is critical for 2015 as its clear corporations will be more focused on share price and avoiding the long arm of President Obama.
It doesn’t say gangbuster spending is ahead, but we could see consumers move up the food chain.
Despite recent upgrades, Conn’s as well as Rent-A-Center have seen their shares under huge pressure, and while deep-discount dollar stores are holding up, its clear the consumer has moved to the next rung of discount reflected in impressive results from Target, Kohl’s and Costco.
Strong Dollar...Too Strong?
President Obama’s pledge to double American exports by the end of 2015 is going to come up short despite surges in oil and autos.
| Obama's 100% Pledge | ||
| Export | 2014 Billion USD | ChangeSince 2009 |
| Fossil Fuels | $123.6 | +211% |
| Automobiles | $46.2 | +145% |
| Civilian Planes and Parts | $82.3 | +50% |
| Computer Chips | $25.8 | +19% |
| Scrap Iron & Steel | $4.7 | -12% |
| Toilet Paper | $1.1 | -29% |
| All Products | $762.1 | +59% |
Some are blaming the strong dollar which was lower a few years ago, but losing the race to the bottom in part to a more resolved US economy, but also because of our historic economic reputation.
Now that the dollar is even stronger, our trade balance is even more out of whack. In December, our trade deficit surged to $46.6 billion, and for 2014, ended at $524 billion, up $76.8 billion or +17% year-to-year.
The dollar has been mentioned by virtually all companies reporting this earnings season and for good reason as four industries get more sales outside of America than domestically, and four other industries are at 30% or more.
I'm a fan of a strong dollar, but also, wish we had policies that would mitigate harm for multinational companies, like making it easier to bring money and factories back home.