Declining Retail Sales in the EU, US Consumer Credit Growth Weakens, UK Credit Rises, more…

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This week continues to demonstrate stagnating retail sales and a trend of EU nations reporting negative data for the month of April. Germany, France, Austria, Italy, Ireland, Greece, Estonia and Slovenia have all contracted.

Outside of Europe, US consumer debt is now sitting at $13 trillion, which Bloomberg reported as a phenomenen of ‘Trump’s America‘. This narrative will grow over time as responsibility for economic decline will be placed firmly on Donald Trump, negating the fact that the conditions for what is now starting to become mainstream grew under Obama’s tenure as president.

Coupled with rising consumer debt was the sharp contraction in US consumer credit growth. The figure of $8.2 billion was the lowest since August 2011. Next week the Federal Reserve will more than likely raise interest rates for the second time this year, subsequently making borrowing and servicing the cost of interest payments more expensive, and also at a time when consumers are seeing no marked increase in income through wages.

The cycle of borrowing to pay down debt, as perverse as that sounds, is an ingrained feature of not only the US economy but the UK as well. If a trend develops for declining consumer credit, then the result will be less money in the economy, given that the money supply is predicated on the creation of money as debt. This won’t become apparent immediately – it takes time for the effects to work their way through the financial system.


Bloomberg: Draghi Says ECB Needs Patience as Inflation Stays Subdued

Mario Draghi said the euro region still isn’t generating enough inflation, overshadowing improved prospects for the economy that led officials to upgrade their growth assessment.

“The risks around the growth outlook are considered to be broadly balanced. At the same time, the economic expansion has yet to translate into stronger inflation dynamics. So far, measures of underlying inflation continue to remain subdued. Therefore, a very substantial degree of monetary accommodation is still needed.”

Draghi said he didn’t hear any “dissenting voice” to proposals that were put forward at the meeting and that tapering of the central bank’s asset-purchase program was not discussed on Thursday.

He said that the ECB removed its easing bias to reflect the fact that the risk of deflation has disappeared.


Market Watch: US Consumer credit growth slows to nearly six-year low in April

  • Consumer borrowing decelerated in April to the smallest increase in almost six years, suggesting an expected rebound in spending in the second quarter may not be as robust as hoped.
  • Total consumer credit rose $8.2 billion in April to a seasonally adjusted $3.82 trillion, posting an annual growth rate of 2.6%, the Federal Reserve reported Wednesday. This is down from a revised $19.5 billion gain in March.
  • The April increase was also well below economist estimates for a $17 billion gain in consumer credit, according to Econoday, and is the slowest monthly growth rate since August 2011.

Business Insider UK: Consumer spending is in ‘long-term decline’ in Britain as clothing sales continue to fall

  • Retail sales fell in May, according to new figures from the British Retail Consortium (BRC), highlighting “a longer-term trend of a decline in consumer spending power” as inflation bites.
  • The BRC said on Tuesday that core retail sales fell by 0.4% in May compared to the same month a year earlier.
  • Total sales, which include sales from new stores opened in the year, rose by 0.2%.The figures put paid to hopes of a recovery for retail sales.
  • After a weak start to the year, sales rebounded in April thanks to the late timing of Easter.However, May’s sales figures suggest April was a blip.

The Telegraph: No end in sight for debt boom as Brits load up on credit cards

  • British shoppers are using the credit cards more than ever before, stoking fears that households are racking up unsustainable levels of debt.
  • Consumers borrowed £16.4bn on the plastic in April, Bank of England figures show, a record high.
  • After taking into account repayments, that added an extra £606m to households total credit card debts, which now amount to £130.3bn.
  • Fierce competition in the market has led banks to offer increasingly generous terms to new credit card customers, with ever-longer interest-free periods.
  • Officials at the Bank of England have warned that they are worried about consumer debt rising to dangerous levels, and banks have indicated that they intend to tighten their lending standards.
  • However there is little sign of that happening so far as the latest figures indicate a sustained splurge by households.

Daily Mail: Household debt bubble hits £198bn and it’s close to bursting: Average home now owes £7,300 after spenders go on a borrowing binge

  • Britain’s enormous debt bubble is on the brink of bursting, experts are warning.
  • Spenders have embarked on a marathon borrowing binge, racking up unsecured debts of £198.4 billion on cards, car finance and overdrafts.
  • That is the highest figure ever recorded by the Bank of England aside from 2008 – the year banks collapsed and the recession began.
  • In November last year the figure was £6 billion lower. The average household now owes £7,300, or more than three months’ pay.

Bloomberg: Trump’s America Is Facing a $13 Trillion Consumer Debt Hangover

  • After bingeing on credit for a half decade, U.S. consumers may finally be feeling the hangover.
  • Americans faced with lackluster income growth have been financing more of their spending with debt instead. There are early signs that loan burdens are growing unsustainably large for borrowers with lower incomes. Household borrowings have surged to a record $12.73 trillion, and the percentage of debt that is overdue has risen for two consecutive quarters. And with economic optimism having lifted borrowing rates since the election and the Federal Reserve expected to hike further, it’s getting more expensive for borrowers to refinance.

Bloomberg: The World’s $100 Trillion Question: Why Is Inflation So Low?

  • Central bankers and investors are grappling with a $100 trillion question: why consumer price inflation remains so low in most parts of the world even as economic growth quickens.
  • Compounding the riddle, question marks are now emerging over the one part of the global inflation picture that had been moving higher — producer prices. That’s because two engines of that turnaround — China’s resurgent factories and prospects for tax-cut fueled stimulus under President Donald Trump — are showing signs of fading.
  • Which way the inflation mystery unravels is crucial for the global monetary policy outlook and the world’s $100 trillion bond market.

Reuters: Euro zone April retail sales rise slightly due to food

  • Euro zone retail sales increased slightly in April, marking the fourth consecutive monthly rise, as shoppers stepped up their purchases of food and drinks for Easter holidays, estimates released on Tuesday show.
  • Retail sales in the 19 countries sharing the euro increased by 0.1 percent in April from March, the European Union’s statistics office Eurostat said, slightly below the average market expectation of a 0.2 percent rise.
  • The monthly rise in April was offset by a downward revision of March data to a 0.2 percent rise from a previously estimated 0.3 percent increase.

BBC: UK car registrations fall 8.5% in May

  • Sales of new cars fell 8.5% in May from a year earlier, with buyers cautious in the run-up to the general election, the Society of Motor Manufacturers and Traders (SMMT) has said.
  • The SMMT said 186,265 new cars were registered in May.
  • But sales of alternatively fuelled cars rebounded after falling in April. They now have a record 4.4% market share.
  • More than 1.1 million new cars have been registered this year to date, down 0.6% on 2016.

Market Watch: World Bank expects big economic growth in 2018

  • A rebound in trade growth from postcrisis lows should help perk up the global economy next year to its fastest pace in nearly seven years, the World Bank said Sunday.
  • But a host of risks threaten a recovery in major emerging markets and an accelerating expansion in rich economies, the bank said in its flagship report.
  • A buildup of emerging-market debt, notably in China, the world’s second-largest economy, risks jeopardizing growth around the globe.
  • “An upward spiral in beggar-thy-neighbor protectionist measures would put into reverse the process of trade liberalization that has been a major contributor to deepening trade in past decades,” the bank said. Widening trade agreements and the growing number of World Trade Organization members have added nearly a percentage point to global trade growth each year, it said. “The unwinding of such agreements would likely put downward pressure on trade prospects and jeopardize the effectiveness and viability of the multilateral trading system.”

Zero Hedge: “Stressed” Australians Struggle With Record Debts As Housing Market Overheats

  • Australians are dialing back their spending on everything from clothes to cars as sky-high housing costs, the result of a housing bubble fueled by Chinese buyers, threaten to finally derail the country’s twin asset bubbles – housing and stocks.
  • But rising mortgage debt isn’t the only thing squeezing Australian customers, as Reuters reports. Inflation on essential items like food, electricity and insurance is accelerating, meaning Australians are also paying higher prices for basic consumer goods.
  • Australia’s real-estate prices have been rising for more than 25 years with hardly a pause – the last time real estate prices saw a meaningful pullback was during its last recession, in 1987. Reuters reported Tuesday that Australia’s debt-to-income ratio has climbed to an all-time peak of 189%, according to the Reserve Bank of Australia.

The Great Recession Blog: Summer Storm Keeps Building as Second Dip of Great Recession Approaches

  • Total household debt now exceeds the peek it hit just before the economic collapse into the Great Recession. While the number of households is also up, wages are correspondingly down, so households have maxed out … again:
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