Week in Review: June 6-10

Trade balances, consumer credit, and inflation (oh my!)

Zack here. The good stuff (inflation, which is actually the polar opposite of “good”) came out on Friday, but there was lots of interesting data Monday-Thursday too. Let’s get right into it.

Monday

Biden Helps Solar

Biden plans to give solar developers a two-year break from tariffs on panel imports. This is good news, as solar development has been largely stalled by a Commerce Department probe of allegations that China is circumventing tariffs. It’s a bizarre and somewhat convoluted story (you can read more about it here).

POTUS also plans to use the Defense Protection Act to help the sector get necessary components. To me, this is good news, and we should be doing everything we can to limit the costs of developing green energy capacity. Lengthy environmental reviews come to mind, which this administration has also taken steps to address (full disclosure, I have no idea if that acceleration has been helpful).

Tuesday

Goods and Services Trade Balance

The U.S. trade balance narrowed pretty sharply from March to April, down $20.6 billion or 19.1%, as imports tumbled and exports surged. This is the lowest the trade deficit has been in 2022. Despite the decline, imports were at the second highest level on record in April, behind only March 2022, while exports climbed to their highest level ever. Year-to-date, the deficit has expanded 41.1% over the first four months of 2021.

Treasury Secretary Yellen Testifies

Janet Yellen said she and Jerome Powell “could have used a better word than transitory,” and on behalf of everyone writing about economics everywhere, we feel your pain, Janet. The primary takeaway here is that she expects inflation to remain high for a while. The secondary takeaway is that she said, “I was wrong then about the path that inflation would take.” I find this commendable; few in the political sphere are willing to admit they were wrong in such plain language.

Consumer Credit

Both revolving (think credit cards) and nonrevolving (think student, auto, and home loans) consumer credit outstanding increased pretty sharply in April, and overall credit outstanding increased at 10.1% annual rate. Given that the personal saving rate fell to 4.4% in April (its lowest level since August 2008), and that inflation is severely elevated, it’s not surprising that consumers are resorting to credit cards.

There was a lot of doom and gloom about this data release. A falling personal savings rate and rising revolving credit usage paints a pretty bleak picture, but there are two reasons for (relative) optimism. First, April was the first time outstanding revolving credit surpassed the pre-pandemic high, and we have just 0.28% more credit card debt than we did in February 2020. Second, there are signs (mostly coming from banks) that credit card usage declined in May, but we’ll have to wait and see on that.

Wednesday

Mortgage Applications