Exploring Economic Indicators: Household Debt, Services PMI & Trade

Despite the economic calendar’s light load last week, there were a few macroeconomic reports that warrant attention. Those are the quarterly household debt and credit report, the services sector PMI, and the trade balance. These data points can collectively provide insights into various aspects of the economy. These aspects  include consumer behavior and service sector health. In this article, we will summarize the latest data on each of these indicators.

According to the latest household debt and credit report released by the New York Fed, household debt increased $109 billion in Q2 of this year to reach a record $17.80 trillion. The latest data represents a 0.62% increase from Q1’s debt level of $17.69 trillion. Most debt categories grew in the second quarter. The latest growth was primarily fueled by increased mortgage and credit card balances. Specifically, mortgage balances hit an all-time high of $12.52 trillion, a 0.6% increase from the previous quarter. Credit card balances reached a record high of $1.14 trillion, a 2.4% increase from the previous quarter. Student loan balances were the sole category that declined last quarter. They fell 0.6% to $1.59 trillion, its lowest level in a year. This comprehensive report serves as a gauge for the financial conditions of U.S. households, offering insights into their economic well-being.

Economic activity expanded in the services sector in July, marking the 47th month of expansion in the past 50. Notably, however, two of the three contraction periods have occurred in the past four months. The ISM Services PMI rose to 51.4 last month, as expected. The majority of the index’s subcomponents improved in July, apart from supplier deliveries and inventories. Additionally, ten service industries reported growth, while eight industries reported a decline. Overall, the business conditions in the services sector continue to steadily grow as many respondents commented on business activity being “stable,” “steady,” and “strong,”

The U.S. international trade deficit shrunk in June, although not as much as anticipated, due to a larger increase in exports than imports. The trade deficit decreased by 2.5% in June to $73.11 billion, larger than the $72.50 billion forecast. Exports rose by $3.9 billion (1.5%) to $265.94 billion, while imports rose $2.0 billion (0.6%) to $339.05 billion. The trade balance, which reports on the country’s imports and exports of goods and services, provides insights into foreign trade dynamics, serving as a gauge for the overall growth or contraction of the economy. The latest data marks the first time the deficit has decreased in the past three months. However, despite the recent contraction, the trade balance gap is considerably large, with the deficit growing 9.2% since the beginning of the year and 12.8% compared to a year ago.

All eyes will be on the latest inflation data this week with the release of July’s Producer Price Index (PPI) on Tuesday followed by the Consumer Price Index (CPI) on Wednesday. Also this week, we’ll get a pulse on consumer spending habits for July and how consumers are feeling with July’s retail sales data on Thursday and the preliminary report of the Michigan Consumer Sentiment Index on Friday.

Current forecasts show that headline and core CPI inflation slowed to 2.9% and 3.2%, respectively. Retail sales, which will impact interests in the SPDR S&P Retail ETF (XRT B+), are expected to have risen 0.3% from June. Lastly, the preliminary report for the Michigan Consumer Sentiment Index, which could impact interest in the Consumer Discretionary Select Sector SPDR ETF (XLY A), is predicted to inch up from July’s final reading of 66.4 to 66.7.

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