See this week's numbersFriday, February 10, 2017

Is this the beginning of an export turnaround?

The U.S. trade deficit improved 3.2 percent in December to -$44.3 billion. The improvement came from a 2.7 percent increase in exports, primarily for aircraft and industrial supplies. The increase in exports was the largest since September 2012. Imports rose 1.5 percent on purchases of autos and materials used in manufacturing. Despite December's improvement, the deficit grew 0.4 percent in 2016 to -$502.3 billion. This is the widest deficit in four years. The annual gap with Mexico widened, while it shrank with China. Net exports subtracted 1.7 percent from fourth quarter GDP, the most since second quarter 2010. The improvement in December suggests demand could be stabilizing for U.S.-made goods.

Other Key Indicators this Week:

JOLTS – The most recent JOLTS report revealed that job openings remained steady in December at 5.5 million. The openings rate is 3.6 percent, just slightly below the 12-month average of 3.7 percent. Before anyone suggests this report is old news and doesn’t really matter since we have received two monthly employment reports since December, it is worthwhile to take a deeper look into the data. The rate of layoffs declined to 1.1 percent, below the 12-month average of 1.2 percent. The rate of hiring inched higher by 40,000 and remains at the 12-month average of 3.6 percent. The important take-away from the data is the downtrend of layoffs versus the stable level of new hires. Companies may be driven by optimism that the economy is poised to grow from here, and, thereby, may be less willing to let good workers go. Coupled with the strong 3.6 percent rate of openings, the backward look suggests we should see a steady pace of hiring in the coming months.

Consumer Credit – The total amount of consumer credit in the U.S. increased by $14.2 billion in December, the smallest monthly change since February 2016. Non-revolving debt, including college tuition and auto loans, rose 5.1 percent and remains the largest category of debt outstanding. Revolving debt, comprised mostly of credit cards, increased 2.9 percent in December, but had the largest annual gain since 2007, up 6.5 percent. Total debt increased 6.4 percent in 2016, the smallest annual gain in three years.

Strategically for Credit Unions:

Credit unions usually begin to see an increase in deposits this time of the year, primarily due to tax refunds. This is not the case so far in 2017. Many credit unions are still experiencing low liquidity levels carried over from the end of 2016. Some of the delay can be traced to a new law focusing on refunds that kicked into gear this year. The Protecting Americans from Tax Hikes (PATH) Act of 2015 prevents the IRS from releasing refunds if any portion is related to earned-income tax credit (EITC) or additional child tax credit (ACTC). Under the law, the IRS must wait until February 15 to release these funds. So, get ready…the deposits are on their way.

Sarina Freedland – Senior Investment Officer

Although this information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results. Changes in any assumption may have a material effect on projected results.

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