When I opened my wallet to pay for parking today, I realized that I fell short by a few bucks. I am either aging and my memory is taking a beating, or I spent more than I realized during this holiday season. According to personal finance company, MagnifyMoney, 2016 has seen more consumer spending and an increase in debt. The average consumer took on $1,003 worth of holiday debt up from $986 in 2015, a 1.7 percent increase. Holiday shoppers came out in droves this year; 154 million people shopped during Thanksgiving weekend, up from 151 million in 2015. The biggest holiday shopping day was Dec. 17, when 156 million people were out spending. Consumer spending shows confidence in the economy, however, taking on too much debt is certainly a problem, which presents an interesting conundrum the U.S. economy and the general public face in 2017.
The stock markets, though, didn’t look puzzled as they rose throughout the holiday during the shortened week and started 2017 on a positive note. Investors appeared to welcome some good economic data and as they looked forward to healthier upcoming quarterly earnings reports. The Dow Jones Industrial Average, which had outperformed strongly since the November elections, just missed crossing the celebrated 20,000 milestone as the benchmark reached 19,999.63 late last Friday before falling back some. Friday brought the closely watched monthly payrolls report, which showed moderate job gains in December and a welcome rise in wages after November’s decline. Stocks did not appear to react strongly to the initial release of the report but rather gathered momentum later in the day thanks to strength in Apple, which has a large weighting in many major indices, after a Canadian regulator announced that it was closing an investigation into anti-competitive practices by the tech giant.
In bond market news, last week dovish Fed minutes helped push yields lower. The minutes revealed that uncertainties about future fiscal policy weighed heavily in policymakers’ discussions of the economy and the path of monetary policy. While the Federal Reserve will watch for other signs of improvement, this report supports the committee's view that the economy can handle two to three short-term interest rate increases in 2017 as inflationary pressures rise heading into the new year. More importantly, as wages accelerate, consumption could rise, fueling economic growth.
Some other market-movers showed Global manufacturing added to the upbeat expectations. The U.S. manufacturing sector saw its strongest growth in two years in December, according to the Institute of Supply Management's purchasing managers index. The employment situation showed initial claims in the December 31 week are strikingly low, down 28,000 to 235,000. The drop pulls the 4-week average down 5,750 to 256,750 a level that is still slightly above, not below, last month’s trend. The nation's trade deficit widened sharply in November, to a higher-than-expected $45.2 billion and well up from a revised deficit of $42.4 billion in October. Exports fell 0.2 percent in November while imports rose 1.1 percent.
The big economic indicators coming up this week are:
Wednesday: EIA Petroleum Status
Thursday: Jobless Claims
Friday: Producer Price Index, Retail Sales
Looking forwards to a healthy and productive new year, and we thank you for your business.
