Partial US government shutdown in December and January interrupted the flow of economic reports, making it difficult to estimate consumer spending, which accounts for 2/3 of US GDP. Due to the delay, we may cling to useful survey data on durable goods, for example, the Fed’s survey of commercial banks on the growth rates of auto loans in their loan portfolios. Car sales, including the ones on credit, are more sensitive to income, i.e. growth in sales should be accompanied by an increase in consumer confidence in the future, which is a direct indicator that the consumer feels s/he has reliable work and expects stability of the income.

The Fed’s survey showed that among the banks, the share of those that reported a decrease in demand for car loans at the end of 2018 has risen. The net share of banks, in which auto loan growth rates slowed down, was 18.2%, while at the same time, 17.4% of banks surveyed said that the demand for consumer loans was also shaken.

The percentage of banks that have experienced a slowdown in demand for credit from consumers has been the highest since 2011.

The slowdown in lending to the nation followed deterioration of consumer expectations indicators, which helps us understand the relationship between them. Consumer sentiment indicator from U. Michigan fell to 91.8 points, the lowest level since the end of 2016:

The fall in demand for auto loans roughly corresponds to a general decline in car sales by about 10% in annual terms in 2018.

The Department of Commerce has not yet announced when the data on retail sales for December will be published, which, should have been released on January 16. However, the figures provided by Motor Intelligence Research indicated a drop in demand for vehicles in January to a 16-month low, providing an insight into the dynamics of US demand for durable goods.

The number of jobs in January increased by 304 thousand, wages strengthened, fuel prices declined, therefore, estimating consumers’ January expectations, we can assume that seasonal factors could interfere with them, take at least “empty pockets effect” after the season of discounts, the month of Christmas and New Year spending The demand for loans for general consumer purposes could be reduced due to the sufficiency of their own funds.

Consumers could also be shocked by the US stock market (S&P 500 lost 14% in the fourth quarter). As investors, households could negatively respond to the current situation due to declining welfare and did so with some lag in January.

The outbreak of risk aversion, respectively, could affect the public’s demand for borrowed funds. If so, then with the recovery of the stock market, an indicator of consumer expectations, should also with some delay turn into growth. In this regard, we can also assume that the data on retail sales, in case of a negative surprise, will not be able to interfere with the trend towards the strengthening of the dollar.

Please note that this material is provided for informational purposes only and should not be considered as investment advice. Trading in the financial markets is very risky.

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