U.S: Credit Still Tight by Angelo Airaghi [Guest Analyst] 7/12/2010

U.S banks are still resilient in expanding credit, especially to the private sector and hiring stays subdued for now. In Europe, exports are increasing, but growth would be uneven.

The economic recovery should continue throughout this year, albeit at a slower pace. The household deleveraging in the United States and in many European countries, coupled with the possible fiscal consolidation in some nations, would eventually slow the recovery next year. In effect, consumer confidence stays subdued, and not only in the U.S., as financial incentives are ending, while hiring remains slow. Banks are still resilient in expanding credit, especially to the private sector. As a result, consumer credit fell 4.5% in May, while delinquency in the credit card business slid to the lowest level of the past seven years. Both the manufacturing and service sector appear to the moderating from higher levels, while the housing market is still near the bottom in many nations. In reality the US manufacturing industry grew for the sixth consecutive month, but new orders declined in June, although remaining in the expansionary mode. The index is now at 54.4 from 62.3 reached in March. The service sector fell instead to 53.8 from 55.4, but business activity stays strong at 58.1. Exports are falling, probably due to the strong U.S. dollar and the contraction in the world economic recovery. Nonetheless, in the U.S., the whole sale inventories rose 0.5% month on month in May, marking the fifth consecutive month of increase. The Federal Reserve is expected to keep rates low for most part of 2010, as inflation is mild and recovery still bumpy.


Angelo Airaghi is a Commodity Trading Advisor, registered with the National Futures Association and the Commodity Futures Trading Commission. He has been an active professional since 1990 working for major international financial companies. In the past 10 years, Angelo Airaghi has been an analyst and commentator for national and international media.

This article contains the following sections:

U.S.: Credit is still low

EUROPE: Exports rising

GBP/USD: at key resistance line

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