Favorable US Economic Data

The favorable news on the US economy extended beyond the jobs data before the weekend. We learned that consumer credit rose in January for the first time since Jan 2009. The $5 bln increase contrasts with expectations of a contraction of a similar magnitude. Some of the details, like an outsized surge in government student loans, seems unlikely to be repeated. The next reports on consumer credit may offer cleaner reads, but we do know that the US savings rates eased in Q4 09 and that consumers have been shopping again here in early 2010.

Recall that Jan retail sales rose 0.5% and 0.6% excluding autos and gasoline. While Feb auto sales were a bit softer than expected, chain store sales rose in Feb for the sixth month and at the fastest pace in more than 2 years. The Feb retail sales report is among the US data highlights of the week and the consensus calls for a small decline in the headline but a 0.3% increase excluding autos and gas. This month's retail sales may be helped by the early Easter this year.

The employment data was also better than expected and has spurred some talk that the unemployment rate may have peaked last Oct at 10.1%. BLS noted that four times more people than average said the weather prevented them from going to work and many of the weather sensitive sectors seem impacted. This will likely boost expectations for the March jobs report. This more favorable economic view, coupled with the $74 bln of Treasury notes and bond supply this week may keep pressure on the US debt market and help keep put a floor under dollar pullbacks.