Tuesday, September 30, 2014

ABA Report: Credit Card Use Mirrors Broader Economy in First Quarter

The economic contraction that occurred in this year’s first quarter also affected the credit card market, putting downward pressure on average credit lines and monthly purchase volumes, according to the latest edition of the American Bankers Association’s Credit Card Market Monitor.

“The sharp economic contraction we saw during this year’s brutal winter also reverberated across the credit card market, with weaker consumer spending leading to a decline in credit card purchases,” said Kenneth J Clayton, ABA’s executive vice president of legislative affairs and chief counsel. “The economy rebounded strongly in the second quarter, and time will tell whether the card market will recover as quickly and robustly.”

The study, reflecting data from the first quarter of 2014, found that monthly purchase volumes declined for all consumer categories. Compared to the fourth quarter of 2013, monthly purchase volumes fell 8.4 percent for sub-prime accounts, 8.1 percent for prime accounts and 5.2 percent for super-prime accounts. This coincided with weak consumer activity, particularly in January and February. Retail sales contracted 1.0 percent on an annualized basis in the first quarter.

Read the full press release.

Home Price Appreciation Continues to Slow

According to the Case-Shiller 20-city index, home price appreciation slowed to 0.6% in July. Notably, year-over-year growth has steadily declined from 13.1% in January to 6.7% in July, a trend that will likely continue due to increasing interest rates. The 10-city index followed a similar pattern, as year-over-year growth slowed from 13.4% in January to 6.7% in July.

9 out of the 10 metropolitan areas saw home prices improve from the previous month. Only San Francisco saw a 0.4% decline. Miami accelerated the fastest at 0.8%. All metropolitan areas continue to see prices above year-ago levels. Notably, the range of growth has narrowed, indicative of a normalizing market.

The 20-city index remains 16.1% below its 2006 peak.

Read the S&P release.

Monday, September 29, 2014

Personal Consumption Rebounded in August

Personal consumption rose 0.5% in August. Personal income rose 0.3%. Both values improved the pace from the month prior, however personal income growth is the second slowest pace all year.

Wage growth grew 0.4% and disposable income improved slightly to 0.3%. Due to no growth of the PCE deflator, real consumption and income growth were the same as nominal growth.

The savings rate declined to 5.4 months, as consumption grew faster than income.

Inflation remained tame; the PCE deflator rose 1.5% above year-ago levels. This was below the 2.0% target of the Federal Reserve.

Read the BEA release.

Friday, September 26, 2014

Consumer Sentiment Improved in August

According to the University of Michigan Consumer Sentiment index, consumer sentiment rose in September to 84.6, the highest value since July 2013.

Current expectations declined slightly to 98.9, but still remain at the second highest level all year. Future expectations jumped to 75.4, the highest reading since July 2013. While consumers are less optimistic about the future in comparison to the present, the gap between current and future expectations shrank.

The report indicated that inflationary expectations subsided slightly from the month prior, calling for 3.0% inflation over the next year and 2.8% over the next 5 years.

Second Quarter GPD Revised Up to 4.6%

Real GDP growth for the second quarter was revised up to 4.6% in the BEA’s final estimate. The upward revision was driven by improvements across the board. Growth in the second quarter jumped following the decline in the first quarter. Second quarter GDP more than compensated for the decline in the first quarter.

Consumption remained the strongest component of growth, contributing 1.8% to second quarter growth, a slight uptick from the previous estimate. Fixed investment jumped from its first quarter reading of 0.0% to 1.5%. Inventories contributed 1.4% in the second quarter, following a 1.2% decline in the first quarter. Inventories tend to be highly volatile. The government went from dragging growth by 0.2% in the first quarter to contributing 0.3% growth in the second.

The healthy growth of the economy in the second quarter is due to several factors. First, the harsh winter is over and the second quarter rebounded as a result. Moreover, the government’s austerity measures are no longer weighing on GDP growth. Finally, customers are spearheading growth with higher consumption levels.

Read the BEA release.

Thursday, September 25, 2014

Durable Manufactured Goods Fell 18.2% in August

New orders for durable manufactured goods fell 18.2% in August, following two consecutive monthly increases. The decline in August was due to a fall in new orders for transportation goods—which experienced a large increase in the previous month. Excluding transportation goods, new orders on durables increased 0.7% in August, which is above the post-recession average.

Transportation goods decreased 42% in August, attributing to most of the month’s decline. New orders for capital goods, including defense and nondefense goods, decreased 34%, led by a 36% decrease in nondefense goods. New orders for computers and electronic products increased 1.7% and new orders for electronic equipment, appliances and components increased 3.1%—both suggest stronger activity among the business sectors. Of some concern, orders for vehicles and parts declined 6.4%.

Read the U.S. Census Bureau release.

Wednesday, September 24, 2014

New Home Sales Jumped in August

New home sales jumped in August to an annual pace of 504,000 units, driven largely by gains in the West region. August’s report, on net, revised previous months by 18,000 units. August’s pace was an 18.0% improvement from July’s and a 33% gain from year ago levels.

Three of the four regions saw their annual pace improve. Only the Midwest saw no growth at 0.0%, but it had the strongest growth the month prior. The West, Northeast and South respectively grew 50.0%, 29.2% and 7.8%.

The surge in sales caused a tightening of new-home inventory. The months supply declined from 5.6 to 4.8. The median prices of a new home in August was $275,000, a decrease of 1.6% from the month prior. However, median home prices are still 7.9% above year ago levels.

Read the Census report.