Consumer Credit, Boosting the Dollar?
The Federal Reserve will releases Consumer Credit figures on Monday, September 8th, 2008 at 3:00 P.M. EST.
The Consumer Credit is a monthly statistical report that measures the total amount of consumer credit aka “outstanding debtâ€. Historically, a rising tide in the consumer credit figure reflects increasing consumer spending which is bullish for the US Dollar. A decreasing trend is thought to indicate less consumer spending thus has bearish tendencies for the US Dollar. Click Here for the link from the Federal Reserve for the release
The Non Farm Payroll employment report came in at 84,000 indicating that 9000 more jobs were lost than forecast. The release had an immediate negative effect on the US Dollar, sending the EUR/USD spiking up nearly 150 Pips this morning. This could throw a monkey wrench into traditional economic thought regarding the Consumer Credit Release. Consumer Credit spiked up 6.7% in June and had a 5% increase in the second quarter.
Analysts are expecting another increase to $8.5 billion dollars this release. If this was not on the heels of a huge decrease in jobs, it would be quite positive for the US Dollar. However, in my opinion, consumers are now using credit as an economic survival tool. They are purchasing things on credit, that they normally would be spending cash for, therefore the increase in credit is merely a shift in style of spending not an actual increase. Whether you decide to read between the lines on the expected release number, or take it at face value, this is an important number to watch.
David Goodboy is Vice President of Marketing for a New York City based multi-strategy fund.