See this week's numbersFriday, January 13, 2017

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Blueprint for Success
Economic Update
The effect of the big red bows

The first tally of how successful retailers were during the prime holiday shopping months was revealed in the Commerce Department's December retail sales report. Total sales rose 0.6 percent in December, and increased 0.2 percent in November, double the original estimate. The driving force in December's sales came from a 2.4 percent increase in auto sales, the largest gain in eight months. Who would have thought the commercials with the big red bows really worked?  Eight of the 13 major retail categories posted gains. Furniture and building supply stores contributed positively to the overall increase in sales. The battle between internet and brick-and-mortar store sales continues with internet sales winning: non-store sales increased 1.3 percent, while most general merchandise and miscellaneous store sales posted losses or minimal gains. Overall, retail sales rose 3.3 percent during 2016, compared to 2.3 percent in 2015.

Other Key Indicators this Week:

JOLTS – The Job Openings and Labor Turnover Survey reiterated what the monthly Labor Department job reports have been telling us: the labor market remains strong with steady growth. The number of job openings increased by 71,000 to 5.5 million jobs. There were 5.2 million jobs available in November 2015. The job opening rate rose from 3.6 percent to 3.7 percent, matching the two-year average rate. The hiring rate was unchanged at 3.6 percent, suggesting a continuation in the net pace of job creation. The quits rate, which measures how many people willingly leave their job, remained steady at 2.1 percent for the sixth month. All aspects of the report signal continued growth in the labor market.

PPI – The producer price index rose 0.3 percent in December. This was the third monthly increase in four months. The gain in wholesale prices was led by a 2.6 percent rise in energy prices, accounting for most of the boost in prices. Gasoline prices alone were up 7.8 percent. The core rate, wholesale prices minus food and energy, was up 1.6 percent from December 2015. The core rate is one of three gauges the Federal Reserve uses to measure inflation. This matches last month for the highest level since January 2015.

Consumer Credit – The amount of consumer credit increased by $24.5 billion, or eight percent, in November. Revolving credit increased 13.5 percent, compared to 2.9 percent in October. Non-revolving credit rose 5.9 percent, just slightly more than in October. Outstanding credit at credit unions grew by almost $1.5 billion. Student loan year-over-year growth was 10.6 percent in November. The annual growth rate has been declining gradually for the past four years, despite some acceleration in November.

Strategically for Credit Unions:

Reality is coming back into focus after the market finally gave up its rose-colored glasses this week. The optimism that drove stock prices and bond yields higher last month is still present, albeit more cautious. The financial markets need to see real plans and strategies for how the economy will be boosted before advancing to the next level. The wait-and-see attitude will allow the Federal Reserve time to adjust interest rates in a slower manner. This will give credit unions some leeway before deposit rates need to be raised. So far, the December rate move has not had a negative impact on housing. Mortgage applications rose 5.8 percent in the first week of January, with both purchases and refis advancing.

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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