US credit growth may be sustained but pending home sales fall

Paul Kasriel thinks that credit growth will continue to boost demand in the US.

[C]hanges in the sum of Fed and depository institution credit, advanced by one quarter, has a correlation coefficient of 0.65 (out of a possible maximum of 1.00) with changes in the sum of nominal Gross Domestic Purchases...

Alright, so why am I bullish on nominal transactions for 2014? Because I am expecting the key “mover” of nominal transactions, the sum of Fed and depository institution credit, to average year-over-year growth from now through the end of 2014 slightly above its long-term median growth of 7.6% . Sustained growth in total thin-air credit of this magnitude has not occurred since the mid 2000s.

In the meantime though, demand for housing in the US is weakening. A report on Monday showed that pending home sales fell 0.6 percent in October, the fifth consecutive month of decline.

Meanwhile, in the UK, the number of mortgage approvals fell to 74,743 in October from 75,077 in September. However, approvals were still 33 percent more in October than a year ago.