Sunday, 18 of February of 2018

Economics. Explained.  

Consumer Finances in Good Shape

February 16, 2018

The Federal Reserve Bank of New York recently released its quarterly report on household debt and credit.  It noted that household debt balances increased last year and are at a record high level.  That is an eye-catching headline and is factually correct.  However, it is grossly misleading.  By any metric consumers can easily afford this higher level of debt.  Debt in relation to income is far below its historical average.  Stock market gains and rising home prices in recent years have boosted consumer net worth.  And delinquency rates on consumer debt are the lowest they have been in a decade.

The New York Fed report accurately noted that consumer debt outstanding climbed last year to a record high level.

This debt is highly concentrated.  Mortgage loans are by far the biggest category and account for $8.9 trillion – or almost 70% — of $13.1 trillion of consumer debt outstanding.

Rather than focus on the amount of debt outstanding it is more appropriate to focus on its growth rate which last year was 4.5%, only marginally faster than in other recent years.  Consumers have not suddenly become spendthrifts.  Can consumers afford this higher, record amount of debt?  Absolutely!

The New York Fed does not point out that while consumer indebtedness has been climbing, steady job gains have also boosted consumer income.  As a result, debt in relation to income remains quite low.  The financial obligations ratio shown below measures consumer payments on mortgage and consumer loans, auto lease payments, rent, homeowners’ insurance, and property taxes in relation to income.  That ratio has been gradually rising for the past two years but, at 15.9%, it is not only below its long-term average of 16.5%, it is essentially where it was back in the mid-1990’s.  It will take several years for this ratio to return to its trendline, and even longer for it to reach an uncomfortable level.

Furthermore, the stock market has been on a steady uptrend since the recession ended in June 2009.  Stock market gains combined with rising home prices have boosted consumer net worth for the past eight years.   It is currently climbing at an 8.0% pace.  As a result, consumers feel good about their financial position and are more willing to spend a bit more freely.

Some economists have noted that the savings rate has fallen to a historically low level of 2.4% which is far below the 5.5% average rate for the past 15 years.  They further suggest that consumers will have to cut back their spending in the months ahead to boost savings.  We disagree.  Given what has been happening to their net worth, consumers do not have a compelling need to save as much of their paycheck as in the past.  That is certainly an understandable reaction.  Remember, the consumer is not dipping into savings.  Rather, he or she is simply saving 2.4% of their paycheck today rather than tucking away the more normal portion of 5.5%.  Note, too, that prior to the most recent recession the savings rate stayed at a comparable level for about three years before the economy finally slipped into recession.  A low savings rate is not a harbinger of slower growth any time soon.

The real proof of the pudding is in delinquency rates.  The percent of consumer loans 90 days or more delinquent has been steadily falling since the recession ended and is now at its lowest level in a decade.

As shown below, delinquency rates have been falling for all types of consumer debt, mortgages and credit cards in particular.

As an aside, whenever the discussion turns to delinquency rates on consumer debt, student loans quickly come to mind.  Two points are worth noting.  First the growth rate of student loans has been steadily slowing from a 15% pace shortly after the end of the recession to about 5.0% currently.  Second, as shown in red on the chart above, the delinquency rate on student debt, while high at 11.0%, has not changed in the past five years.

The important point to note is that consumer debt continues to climb, but steadily rising consumer income and net worth ensure that this higher level of debt is affordable.  There is nothing in the consumer’s financial position today that should warrant concern.

Stephen Slifer


Charleston, S.C.

GDP Forecasts

February 16, 2018


Fourth quarter GDP growth came in at 2.6% which was a bit less than the 3.0% rate that had been projected.  However, the shortfall was all in inventories.  Final sales, which excludes the change in inventories rose by a solid 3.2%.

Consumer spending climbed at a robust 3.8% rate in the fourth quarter following growth of 2.2% in the third quarter.  Third quarter growth was held down by the two hurricanes last summer, and fourth quarter growth represents the rebound.  We expect consumer spending to rise 2.8% this year.  The consumer and corporate tax cuts have lifted the stock market to a record high level.  The increase in stock prices is boosting household wealth.  The gains in employment are generating income which gives consumers the ability to spend.  Consumer debt is very low in relation to income.  Consumer confidence is at a multi-year high.  Gas prices are expected to remain at their current relatively low level through the end of this year.  Interest rates remain low and are rising very slowly.

Investment spending rose 6.8% in the fourth quarter after climbing 4.7% in the third quarter.  However, investment spending was essentially unchanged for the previous three years.  It appears that the prospect of corporate tax cuts, repatriation of earnings at a favorable tax rate, and a reduction in the regulatory burden is giving business leaders confidence to open their wallets and spend on new equipment and technology.  Not only will this boost GDP growth in the short term, if investment continues to climb it will boost productivity growth which will, in turn, raise the economic speed limit from about 1.8% today to 2.8% or so in the years ahead.

The trade gap widened by $55.1 billion in the fourth quarter after having narrowed by $16.1 billion in the third quarter.  The swings seem to reflect the inability to import goods into the Houston area in the third quarter in the wake of the two hurricanes, and the subsequent rebound in Q4.  We expect the trade component to have little impact on GDP growth in 2018.

Expect GDP growth of 2.9% in 2018 after having registered growth of 2.5% in 2017.

The inflation rate is gradually beginning to climb.  The economy is at full employment which finally appears to be boosting wages.  Both manufacturing and non-manufacturing firms are paying high prices for their raw materials so commodity prices are on the rise.  There is a shortage of available homes and apartments in the housing sector which is raising rents.  Thus inflation does, in fact, seem headed higher as the year progresses.   However, the pickup in inflation will be limited as internet price shopping will keep goods prices falling in 2018.  As a result we expect the core CPI to rise  1.8% last year to 2.4% in 2018.  Slightly faster inflation will push long-term interest rates higher with the 10-year hitting 3.1% by the end of 2018 and mortgage rates climbing to 4.6%.

With GDP likely to expand in 2018 at a rate slightly faster than its  potential and inflation expected to rise slightly above its target, the Fed will feel compelled to continue on a path towards gradually higher interest rates.  It needs to do so to get itself into position to lower rates when the time comes, but it appears to have the luxury of taking its time.  We expect three rate hikes in 2018 which would put the funds rate at 2.0% by the end of that year.  The Fed will also continue to run off some of its security holdings throughout 2018.

Stephen Slifer


Charleston, SC


Consumer Sentiment

February 16, 2018

The preliminary estimate of consumer sentiment rose  2.2 points in February to 99.9 after having declined 0.2 point in January.  The February level is just a shade below the 100.7 reading for October which was the highest level of sentiment since January 2004.

Richard Curtin, the chief economist for the Surveys of Consumers, said “Stock market gyrations were dominated by rising incomes, employment growth, and by net favorable perceptions of the tax reforms. Indeed, when asked to identify any recent economic news they had heard, negative references to stock prices were spontaneously cited by just 6% of all consumers. In contrast, favorable references to government policies were cited by 35% in February, unchanged from January, and the highest level recorded in more than a half century.

Given the tax cuts we expect GDP growth to climb from 2.5% in 2017 to 2.9% in 2018.  We expect the economic speed limit to be raised from 1.8% to 2.8% within a few years.  That will accelerate growth in our standard of living.  We expect worker compensation to increase 3.0% in 2018 vs. 1.8% last year. The core inflation rate (excluding the volatile food and energy components) rose 1.8% in 2017 but should climb by 2.4% in 2018.  Such a scenario would keep the Fed on track for the very gradual increases in interest rates that it has noted previously.  Specifically, we expect the funds rate to be 2.0% by the end of 2018.

The two components of the overall index both rose in February.

Consumer expectations for six months from now rose 3.9 points from 86.3 to 90.2.

Consumers’ assessment of current conditions rose 4.6 points from 110.5 to 115.1.

Trends in the Conference Board measure of consumer confidence and the University of Michigan series on sentiment move in tandem, but there are often month-to-month fluctuations.  Both series remain at levels that are consistent with steady growth in consumer spending at a reasonable clip of about 2.6% in 2018.

Stephen Slifer


Charleston, SC

Housing Starts

February 16, 2018

Housing starts rebounded by 9.7% to 1,326 thousand in January after having fallen 6.9% in December to 1,192 thousand.  Because these data are particularly volatile on a month-to-month basis, it is best to look at a 3-month moving average of starts (which is the series shown in blue above).   That 3-month average now stands at 1,278 thousand which is the fastest pace of starts thus far in the business cycle.

Both new and existing home sales continue to trend upward but they are being constrained by a lack of supply.   Thus, the demand for housing remains robust.

Builders remain enthusiastic in part because they see traffic through the model homes climbing at a steady rate.

Mortgage rates are at 4.2% which is quite low by any historical standard.

The average home stays on the market for about 40 days currently which is down from 90 days a few years ago.  One-half of the homes coming on the market sell within one month.  This statistic provides compelling evidence that the demand for housing remains robust.

At the same time employment gains are about 170 thousand per month which is boosting income.  As a result, real disposable income (what is left after inflation and taxes) is growing at a 2.1% pace which is acceptable but below to its long-term average of 2.7%.

Housing remains affordable for the median-price home buyer.  Mortgage rates may have risen, but income has been rising almost as quickly, hence affordability has not dropped much.  At 160.0 the index  indicates that a median-income buyer has 60.0% more income than is necessary to purchase a median-priced house.

The problem in housing is not a lack of demand.  Rather it is a constraint on the production side.  Builders have had difficulty finding an adequate supply of skilled labor.  Construction employment is growing by about 20 thousand per month.  Slow, but steady.

As one might expect there is a fairly tight correlation between home builder confidence and the starts data which probably makes a great deal of sense.   Judging by the homebuilder confidence data we should expect starts to eventually climb to 1.5 million or so from about 1.25 million currently.  However,  as noted above, many home builders  report an inability to get the skilled workers they require.   Overcoming the labor shortage on a long-term basis will be challenging.  Employment in the construction industry will continue to climb, but slowly, which will limit the speed with which starts rise in the months ahead.

Another thing worth noting is that about 1.3 million new households are being formed every year.  Those families all need a place to live, either a single-family home or an apartment.  Thus, we need to see housing starts rise by 1.3 million just to keep pace with growth in households.  And because housing starts were substantially below the growth in households for so long, there is pent-up demand.  We expect starts to reach 1.35 million in 2018.

What is interesting is that beginning in mid-2016 single family starts have begun to climb while multi-family buildings such as apartments have been slowing down.  It appears that many of the millennials who chose to rent for the last decade are getting older, perhaps starting families, and are now choosing to purchase a single family house.  In the past year single family starts have risen 9.1% while multi-family units have declined by 4.5%.

As a result, multi-family construction as a percent of the total has slipped from 37% in mid-2015 to 32%.

Building permits climbed 7.4% in January to 1,396 thousand after having fallen 0.2% in December.  Because  permits are another volatile  indicator it is best to look at a 3-month average (which is shown below).  That 3-month moving average now stands at 1,333  thousand which is the fastest pace thus far in the business cycle and continues to point towards slow but steady improvement in housing.   The reason people look at permits is because a builder must first attain a permit before beginning construction.  Thus, it is a leading indicator of what is likely to happen to starts several months down the road.  If permits are currently at 1,322 thousand, housing starts will soon surpass the 1.3 million mark.

Stephen Slifer

Charleston, SC

Homebuilder Confidence

February 15, 2018

Homebuilder confidence was unchanged in February at 72 after having declined 2 points in January.  The December level of 74 was the highest for this series since July 1999 — over 18 years ago.

NAHB Chairman Randy Noel, a homebuilder from LaPlace, Louisiana, said, “Builders are confident that changes to the tax code will promote the small business sector and boost broader economic growth.  Our members are excited about the year ahead, even as they continue to face building material price increases and shortages of labor and lots.”

Traffic through the model homes was unchanged in February at 54 after having fallen 4 points in January,  However, the December level of  58 which was by far the highest level thus far in the business cycle.  Traffic volume remains high and is a sign that buyer demand is on the rise.

Not surprisingly there is a close correlation between builder confidence and housing starts.  Right now starts are lagging considerably because builders are having some difficulty finding financing, building materials, an adequate supply of finished lots, and skilled labor.  Starts  currently are at a 1.25 million pace.  They should continue to climb gradually in the months ahead and reach 1.35 million by the end of 2018.

Stephen Slifer


Charleston, SC

Industrial Production

February 15, 2018

Industrial production declined 0.1% in January, but that follows increase of  1.7% in October, 0.3% in November and 0.4% in December.   The strength in the final three months of last year probably reflects post-hurricane rebuilding which probably shifted some production forward into the final quarter of last year from the first quarter of this year.  During the past year industrial production has risen 3.7%.  It is gradually gathering momentum.

Breaking industrial production down into its three major sub-components,  the Fed indicated that manufacturing production (which represents 75% of the index) was unchanged in both December and January. During the past year  factory output has risen 1.8% (red line, right scale).  The 2.3% year-over-year increase for November was the largest 12-month increase since July 2014.  The factory sector is clearly staging a modest pickup.

Auto output rose 0.6% in January after having increased 1.1% in December.    During the past year motor vehicle production has risen 1.4%.  Factory production ex motor vehicles has risen 3.8% in the past year.  Thus, factory output has been climbing, but its rate of increase in the past year has been curtailed by a  slowdown in the sales and production of motor vehicles.

Mining (14%) output declined 1.0% in January after having fallen 0.4% in December.  Over the past year mining output has risen 8.8%.  Most of the recent upturn in mining has been concentrated in oil and gas drilling activity.  Oil and gas drilling declined 1.4% in January after having risen 0.9% in December.     Over the course of the past year oil and gas well drilling has risen 31.2%.  The number of  oil rigs in operation has rebounded in recent months.  Drilling activity is poised to resume its upward trajectory.

Utilities output rose 0.6% in January after having jumped 4.6% in December.  During the past year utility output has risen 10.8%.

Production of high tech equipment rose 0.9% in January after having risen 2.2%, 2.0% and 1.8% in the October, November, December period.  Over the past year high tech has risen 7.9%, but in the past three  months high tech production has climbed at a steamy 19.2% pace.   Thus, the high tech sector sector appears to have gathered considerable momentum in recent months. This is an indication that the long slide in nonresidential investment has come to an end which would, in turn, signal an upturn in productivity growth.

Capacity utilization in the manufacturing sector was unchanged in January at 76.2%.  It is slightly below the 77.4% that is generally regarded as effective peak capacity.

Stephen Slifer


Charleston, SC

Producer Price Index

February 15, 2018

The Producer Price Index for final demand – intermediate demand  includes producer prices for goods, as well as prices for construction, services, government purchases, and exports and covers over 75% of domestic production.

Producer prices for final demand rose 0.4% in January but that follows no change in December.  During the past year this inflation measure has risen 2.6%.  It had been bouncing around in a range from 2.0-2.5% for the some time but has now begun to rise somewhat more rapidly.

Excluding food and energy producer final demand prices also rose 0.4% in January after having declined 0.1% in December.  They have risen 2.3% since January of last year.  This series has been quietly accelerating for the past two years.  Inflationary pressures are gradually re-surfacing.

This overall index can be split apart between goods prices and prices for services.

The PPI for final demand of goods jumped 0.7% in January after having risen 0.1% in December. These prices have now risen 3.4% in the past year (left scale).  Excluding the volatile food and energy categories the PPI for goods rose 0.2% in both December and January.  During the past year the core PPI for goods has risen 2.1% (right scale).  It has been rising at about that pace for the past year .

Food prices fell 0.2% in January after having declined 0.4% in December.  Food prices are always volatile.  They can fall sharply for a few months, but then reverse direction quickly.  Over the past year food prices have risen 1.7%.

Energy prices jumped 3.4% in January after having risen 0.5% in December and 3.6% in November.  Energy prices have risen 9.6% in the past year.  These prices are also very volatile but the recent upswing seems to reflect a significant quickening of GDP growth around the globe.  However, U.S. oil output is now surging and crude prices have fallen from about $69 per barrel  to about $60 in the past couple of weeks which will trigger a significant drop in this component in February.

The PPI for final demand of services rose 0.3% in January after having declined 0.1% in December.  This series has risen 2.2% over the course of the past year (left scale).   Changes in this component largely reflect a change in margins received by wholesalers and retailers (apparel, jewelry, and footwear in particular).  The PPI for final demand of services excluding trade and transportation rose 0.3% in January after having declined 0.1% in December .  It has climbed 2.2% during the past year.  This series, like the overall index, has been gradually accelerating for some time.

The recent increases in producer prices was foreshadowed by the results of the Institute for Supply Management’s series on prices paid by both manufacturing and non-manufacturing firms.  In the case of manufacturing firms the chart looks like this:

And for non-manufacturing firms it looks like this:

In both cases, the run-up in prices was widespread.  It was not just energy prices.  Once again, we believe this escalation in the prices that producers are having to pay reflects stronger GDP growth around the globe.

Because the PPI measures the cost of materials for manufacturers, it is frequently believed to be a leading indicator of what might happen to consumer prices at a somewhat later date.   However, that connection is very loose.

It is important to remember that labor costs represent about two-thirds of the price of a product while materials account for the remaining one-third.  So, a far more important variable in determining what happens to the CPI is labor costs.  With the unemployment rate currently at 4.1%, the labor market is beyond full employment.  As a result, wages pressures are sure to rise, and once that happens firms are almost certain to pass that along to the consumer in the form of higher prices but some of the upward pressure on inflation should be countered by an increase in productivity,.

Some upward pressure on labor costs, rents, and medicare care will further increase the upward pressure on inflation.  We expect the core CPI to increase 2.4% in 2018 after having risen 1.8% in 2017.

Stephen Slifer


Charleston, SC

Initial Unemployment Claims

February 15, 2018

Initial unemployment claims rose 7 thousand to 230 thousand in the week ending February 10 after having declined 7 thousand in the previous week.  .The 4-week moving average is at 229 thousand which remains essentially at the lowest average since March 10, 1973 when it was 222 thousand.

Ordinarily, with initial unemployment claims (the red line on the chart below, using the inverted scale on the right) at 229 thousand  we would expect monthly  payroll employment gains to exceed 300 thousand.  However, employers today are having difficulty finding qualified workers.  As a result, job gains are significantly smaller than this long-term relationship suggests and are currently about 190 thousand.

With the economy essentially at full employment, employers will have steadily increasing difficulty getting the number of workers that they need.  As a result, they will be forced to offer some of their part time workers full time positions.  This series is still a bit high relative to where it was going into the recession.

They will also have to think about hiring  some of our youth (ages 16-24 years) .  But the youth unemployment rate today is the lowest it has been in 17 years so there are not many younger workers available for hire.

Finally, employers may also consider some workers who have been unemployed for an extended period of time.  But these workers do not seem to have the skills necessary for today’s work place.  Employers may have to offer some on-the-job training programs for  those whose skills may have gotten a bit rusty.  But even if they do, the reality is that the number of discouraged workers today is quite low — roughly in line with where it was going into the recession.

The number of people receiving unemployment benefits rose 15 thousand in the week ending February 3 to 1,942 thousand after having risen by 29 thousand in the previous week.  The four week moving average declined 6 thousand to 1,942 thousand which is somewhat higher than the lowest level thus far in this cycle (1,889 thousand) and also close to the lowest reading January 12, 1974 (when it was 1,881 thousand).   The only way the unemployment rate can decline is if actual GDP growth exceeds potential.  Right now the economy is climbing by about 2.5%; potential growth is  projected to be about 1.8%.  Thus, going forward  the unemployment rate will continue to decline slowly.

Stephen Slifer


Charleston, SC

Gasoline Prices

February 14, 2018

Gasoline prices at the retail level fell $0.03 in the week ending February 12 to $2.61.  In the low country of South Carolina gasoline prices tend to about $0.25 below the national average or about $2.36. The Department of Energy expects national gasoline prices to average $2.62 this year which is almost exactly where they are currently.

Spot prices for gasoline have fallen about $0.26 from their late January peak which suggests that pump prices should soon follow suit.

Crude oil prices are currently about $59.00.  The Energy Information Agency predicts that crude prices will average $58.28 in 2018.  With a huge increase in production the past two weeks (see below) and a small increase in inventories (see below) it is likely that crude prices will be relatively unchanged for the rest of the year.

The number of oil rigs in service dropped 79% to 404 thousand  after reaching a peak of 1,931 wells in September 2014.  However, the number of rigs in operation has actually rebounded in recent months to 975 thousand.  Thus,  higher crude oil prices are encouraging some drillers to step up slightly the pace of production.  If crude prices are relatively stable at about $58 per barrel, we should still expect the number of oil rigs in operation to increase gradually and further boost production.

Production in the past two weeks surged to 10,271  thousand barrels per day which continues to climb and further surpasses the previous record pace of production of 9,610 barrels per day set in 1970.  The Department of Energy expects production to average 10.6 million barrels this year and 11.2 million barrels in 2019.  As U.S. production continues to climb, crude prices should remain below $58 per barrel and could fall further.

How can the number of rigs rise slowly but production surge?  Easy.  Technology in the oil sector is increasing which allows producers to boost production while simultaneously shutting down wells.  A few years ago some frackers could not drill profitably unless crude oil prices were about $65 per barrel.  Today that number has declined to about about $48 per barrel.  Six months from now that number will be lower still.

Oil inventories have fallen quickly for most of last year.    OPEC output has been reduced at the same time that global demand has picked up sharply.  While crude inventories have been sliding for a year, at 1.088 million barrels crude inventories are now roughly in line with the 2009-2014 average of 1,058 million barrels and in the past two weeks registered their first increase in a while.  Hopefully, increased U.S. production and inventory levels will cause crude price to retreat.

The International Energy Agency in Paris (IEA) produces some estimates of global demand and supply.  Note how demand picked up sharply in the second quarter of last year (the yellow line) and continued to climb through the end of last year.  Demand should climb further throughout 2018.  Note also that global demand far exceeded supply (the blue bars) for most of last year.  However the IEA believes that demand and supply are now roughly in balance.

OPEC’s production cuts, which are now in their second year, have been successful in reducing bloated inventories and lifted prices to $67 per barrel.  But OPEC could become a victim of its own success.  If prices remain at their current level of about $58 per barrel, the IEA warned that U.S. oil output is set for “explosive” growth this year  as U.S. producers re-open closed wells which would produce a wave of shale oil and potentially trigger another price decline like that experienced in 2014.  OPEC ministers recently voted to maintain the production cuts through yearend.  At some point crude prices should begin to fall.

Stephen Slifer


Charleston, SC*

Retail Sales

February 14, 2018

Retail sales surprisingly declined 0.3% in January after having been unchanged in December.  However sales surged by 2.0% in  September, 0.7% in October and 0.8% in November.  During the course of the past year sales have risen 3.6%.  Our sense is that sales rose sharply in the months immediately following the two hurricanes and some sales shifted into those months at the expense of sales that would typically have occurred in December and January.  The trend rate has not change during that period of time, just the monthly pattern of sales.

Sometimes sales can be distorted by changes in autos which tend to be quite volatile.  In this particular instance car sales fell 1.3%.

Fluctuations in gasoline prices can also distort the underlying pace of retail sales.  If gas prices rise, consumer spending on gasoline can increase even if the amount of gasoline purchased does not change.  Gasoline sales rose 1.6% in January.  While higher gas prices boost the overall increase in sales, they typically do not reflect an actual increase in the volume of gasoline sold.

Perhaps the best indicator of the trend in sales is retail sales excluding the volatile motor vehicles and gasoline categories.  Such sales fell 0.2% in January after having been unchanged in December.  But such sales rose 0.9% in September, 0.5% in October and 1.0% in November.  As noted above, this pattern seems to reflect a post-hurricane surge in sales which shifted some sales into the September-November period at the expense of sales in December and January.   In the last year retail sales excluding cars and gasoline have risen 3.7%.

While there has been a lot of disappointment about earnings in the traditional brick and mortar establishments (like Macy’s, Sears, K-Mart, and Limited) the reality is that they need to develop a better business model.  The action these days is in non-store sales which have been growing rapidly. Consumers like the ease of purchasing items on line.  While sales at traditional brick and mortar general merchandise sales have risen 3.0% in the past year, on-line sales have risen 11.2%.  As a result, their share of total sales has been rising steadily and now stands at a record 11.2% of all retail sales.

We believe that retail sales will continue to chug along at a 2.5% pace for some time to come..  First of all,  existing home sales are selling at a rapid clip and would be selling at a faster pace if there were more homes available for sales.  Consumers do not purchase homes and cars — the two biggest ticket items in their budget — unless they are feeling confident about their job and the future pace of economic activity.

Second, the stock market is close to a record high level despite its recent correction.  That increase in stock prices boosts consumer net worth.

Third, all measures of consumer confidence are at their highest levels thus far in the business cycle, and consumer confidence from the Conference Board is at its highest level since the early part of 2004.

Fourth, cuts in individual income tax rates will boost sales in 2018.

Finally, the economy is cranking out 170 thousand new jobs every month which boosts consumer income.  Consumers have paid down a ton of debt and debt to income ratios are the lowest they have been in 20 years.  That means that consumers have the ability to spend more freely and boost their debt levels if they so choose.

Thus, the pace of consumer spending seems steady.  We continue to expect GDP growth to quicken from 2.5% in 2017 to 2.9% this year.

Stephen Slifer


Charleston, SC