Consumer credit had fallen by a total of $168bn from October 2008 to August 2010. But it rose by $2.1bn in September, which was just the third increase in two years. We expect consumer credit to have stagnated in October, in line with the findings in the latest Beige Book.

Initial jobless claims rose by 26k to 436k in the week ending 27 November, but figures may have been tilted to the upside because that week included the Thanksgiving holiday. However, the 4-week moving average dropped again by about 5k to 431k. After last week’s sharp rise, we predict that jobless claims will have declined to about 425k in the week ending 4 December.

Growth in wholesale inventories accelerated in the 3rd quarter, while sales growth was much slower, leading to a slight but continuous rise in the inventories-to-sales ratio. We thus predict that growth in wholesale inventories will have slowed to 0.8% mom in October.

The trade deficit narrowed by $2.5bn in September, as exports rose modestly and imports dropped by 1.0% mom. Imports may have recovered somewhat in October, as import prices increased by 0.9% mom, mainly due to higher oil prices. However, according to figures from the Department of Energy, the volume of oil imports could have gone down. Given that the ISM manufacturing’s export component jumped by 6 points, while the imports component dropped by 5 points, we expect exports to have increased more sharply than imports. The trade deficit could therefore have narrowed slightly to $43.5bn in October.

As crude oil prices increased by about 10% mom in the statistically relevant first third of the month, we expect import prices to have gone up by about 1.0% mom in October. Due to a base effect, the annual rate could nevertheless decline from 3.6% to 3.1%. Import prices ex petroleum are likely to have risen only moderately, and thus the annual rate could decrease from 2.7% to 2.3% in October.

The University of Michigan’s (UMI) final consumer sentiment was revised up significantly from 67.7 to 71.6, indicating that late respondents were much more optimistic. Recent news from the labour market has been mixed: the number of jobless claims has trended downward, but both the November increase in the unemployment rate and moderate job growth were disappointing. Gasoline prices have kept on rising, and more than 2 million unemployed could lose their benefits in the new year after Congress failed to extend benefit payments. However, reports on sales at the beginning of the holiday season were relatively favourable, and the latest weekly ABC consumer comfort index improved by two points. All in all, we expect UMI’s preliminary December consumer sentiment to have increased further to about 74.0.

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