Wednesday, August 4th, 2010
A key indicator of the strength of the American economy’s recovery shows that the recession is still rearing its ugly head. Sources indicate that the Consumer Confidence Index fell to 50.4 in July, its lowest mark in five months.
The Consumer Confidence Survey, used by financial experts to gauge the pulse of the average consumer, is determined by polling 5,000 U.S. households. The answers from this representative polling reveal pessimistic attitudes about the short-term future of the economy:
- The current Index figure, 50.4, is down from 54.3 in June and 63.3 in May. For perspective, the lowest number ever calculated by the Index was 25.3 in April of 2009, during the peak of the recession.
- Every component of the Index dropped during July. These components included negative attitudes about business and fears of a continually weak labor market.
- Only 4.3 percent of respondents said that available jobs were “plentiful.”
- Almost half of respondents said that jobs are “hard to get” in July, which was a 2.5 percent jump from such claims in June.
- The percentage of people expecting new jobs to become available in the coming months also dropped by a few percentage points, and the number of people expecting an improvement in business conditions also fell.
Effects of Lowered Consumer Confidence
These statistics seem dour, but how do they impact the real economic world? The director of the Conference Board’s Consumer Research Center, Lynn Franco, said the recent drop in consumer confidence could have a negative impact on a key period of consumer activity for business.
According to Franco, given consumers’ lowered confidence, as well as “pessimistic income outlook and lackluster job growth, retailers are very likely to face a challenging back-to-school season.”
Further, the lack of consumer confidence shows no signs of quickly shifting in a positive direction. As Franco said, “[c]oncerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves.”
How Accurate is the Consumer Confidence Index?
Historically, the Index has been remarkably adept at providing economic insight. During its use, when the Index has detected rises in consumer confidence, those rises are accompanied by increases in consumer spending.
Since consumer spending is an integral part of the American economy, accounting for almost 70 percent of the country’s total GDP, rising consumer confidence generally leads to more spending, which invariably boosts our economic health.
As the economy continues to sputter, more and more people are finding it necessary to consider personal bankruptcy. If your confidence is down due to financial ills like debt or home foreclosure, consider contacting an personal bankruptcy attorney.
Posted in Bankruptcy and the Economy, Consumer spending, consumer confidence, economic trends | Comments Off
Tuesday, July 20th, 2010
As many people who have filed for bankruptcy know, one of the main causes of filing bankruptcy is unmanageable credit card debt. Often, a bankruptcy filing comes after months of missed payments.
Recent data from the American Bankers Association (ABA) shows that, as a nation, we’re improving our on-time payment rate for our credit cards. In fact, we’ve improved in a variety of areas:
- Bank card delinquencies reportedly fell to 3.88 percent of all accounts, down from 4.39 percent in the fourth quarter of 2009. The current rate is also apparently below the 15-year average of 3.93 percent and stands as the lowest rate recorded since 2002.
- Auto loan delinquencies fell in both the direct category (from 1.94 percent to 1.79 percent) and the indirect category (from 3.15 percent to 3.04 percent).
- Home equity loan delinquencies dropped from 4.32 percent to 4.12 percent, marking the first dip in two years, according to the ABA.
- Personal loan delinquencies decreased slightly, from 3.63 to 3.61 percent.
- Property improvement loan delinquencies inched downward, from 1.63 percent to 1.40 percent.
- Home equity lines of credit delinquencies dropped from 2.04 percent to 1.81 percent.
The ABA considers loans delinquent when payments are thirty days or more overdue, so the decrease in delinquency rates suggests that more Americans are making a concerted effort to make payments on time, on a variety of loan types.
But not all of the ABA’s findings were rosy: the group also noted that several categories saw increased delinquency in the first quarter of 2010:
Marine loan delinquencies: Up to 1.93 percent from 1.63 percent
- Mobile home loan delinquencies: Up to 3.65 percent from 3.41 percent
- RV loan delinquencies: Up to 1.58 percent from 1.44 percent
- Non-card revolving loan delinquencies: Up to 1.63 percent from 1.46 percent
While some analysts point to the overall decrease in consumer delinquencies as evidence to support the theory that the economy is on the upswing, others looking at the financial landscape aren’t so sure.
Numbers from the Federal Reserve released earlier this month indicate that, overall, consumer credit decreased in May 2010, which can be read as a positive sign (because people are borrowing less and so are accumulating less debt) or as a negative sign. After all, one of the main reasons we’re taking out fewer loans and opening fewer credit cards as a nation is that lenders have tightened their standards and are less willing to offer us money.
The Fed’s numbers are especially telling when broken into their categories: while consumer debt overall decreased at an annual rate of 4.5 percent in May, revolving credit (which encompasses the vast majority of credit cards) decreased at a rate of 10.5 percent, and non-revolving credit decreased only at a rate of 1.5 percent.
The jury may be out on whether these numbers are good for the larger economy, but if you’re part of the trend of paying loans on time, keep up the good work.
Additional Resources
Credit Card Borrowing, Delinquency, and Personal Bankruptcy
Debt, Delinquency, and Consumer Spending
Posted in Credit Card Debt, Credit and Bankruptcy, delinquency rate, economic trends | Comments Off
