The Consumer Might Be Teetering

August Credit Card Data

We have updated data on credit card delinquencies and charge offs from the 8 top credit card lending firms. This includes firms such as Citigroup, JP Morgan Chase, and American Express. The August results were good as the average delinquency rate rose 9 basis points to 1.98%, which is still down 23 basis points from June. The average charge off rate fell 9 basis points to 3.46%; its down 26 basis points from June. There are loans in forbearance just like mortgages. It was very smart/necessary for the banks to delay payments for a few months. It allowed the economy to avoid disaster. The key will be for the economy to reopen via expanding testing from Abbott Labs. That could create a second partial V-shaped recovery like we saw in the first couple months after the recession ended.

Subpar Industrial Production Report

The August industrial production report disappointed economists. The good news is July growth was revised higher. Specifically, monthly industrial production growth in July was pushed up 0.5% to 3.5%, but August growth fell to 0.4% which missed estimates for 1.2%. This was the 4th straight month of positive growth. Industrial production is 7.3% below its pre-COVID-19 output. Yearly growth fell from -7.4% to -7.7%. Manufacturing growth in July was also revised up 0.5% to 3.9%, but August’s monthly growth was 1% which missed estimates for 1.9%.

As you can see from the chart below, 93% of manufacturing industries are in contraction.

Yearly growth rose from -6.9% to -6.6%. Manufacturing is 6.7% below its pre-COVID-19 output. There was weakness in autos in August. Mining fell 2.5% monthly due to the disruptions from hurricane Laura and the overall terrible market for energy. ExxonMobil stock was down 11 days in a row as of Tuesday. Utilities production fell 0.4% monthly.

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