Robert Ore | Phil's Stock World
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No green shoots here
Consumer Metrics Institute Personal Finance Index Continues to Deteriorate
Below is an addendum to the update sent out on Tuesday, addressing new data reflecting changes in consumer behavior concerning their debt:
The Consumer Metrics Institute’s Personal Finance Index continued its decline for the sixth consecutive week, with it now showing a year-over-year decline in consumer confidence in excess of 40%.
This contrasted sharply with the situation as recently as the end of January 2010, when the same measure of confidence was showing a year-over-year gain in excess of 7%. The Consumer Metrics Institute’s Personal Finance Index is composed of a number of data series, some of which collect transactions that are precursors to the initiation of default and/or foreclosure activities. The levels of these negative activities are inverted before being included in the ‘Personal Finance Index’, so that a rapid rise in Consumer transactions with default and foreclosure counseling services, for example, will drive that particular index down.
[http://www.consumerindexes.com/weekly_personal_finance.png]
The Personal Finance Index is not alone in reflecting continued weakness. In fact, our ‘Weighted Composite Index’ (which is by far our best daily aggregate measure of the consumer ‘demand’ side of the economy) has shown a relatively steady deterioration since peaking in August 2009, with the trailing month now recording contraction in excess of 2%.
[http://www.consumerindexes.com/monthly_weighted_composite.png]
The sliding ‘trailing quarter’ as reflected in our ‘Daily Growth Index’ has also reached a level consistent with a year-over-year contraction rate of about 2%, after initially dropping into net contraction on January 15th. When compared to previous contraction events in 2006 an 2008 this particular episode of contraction in consumer demand is following a unique profile: at it’s worst it is still milder than the mild 2006 event but it has gone on longer than even the 2008 event without forming a clear bottom.
[http://www.consumerindexes.com/commentary_2010_contraction_watch.png]
If the housing market is expected to recover soon, a significant increase in demand for residential real estate loans will need to be occurring in the near future. Although there has been a recent minor upturn in consumer interest in refinancing on a year-over-year basis, it may only be a sign that consumers are beginning to expect that the historically low mortgage rates are nearing an end.
[http://www.consumerindexes.com/weekly_refinance.png]
A more telling development would be for a similar upturn in consumer interest in new loans, which we…
Tags: consumer finances, consumer metrics institute, consumer spending, home loans, ISM, personal finance, refinancing, Richard Davis, Robert Ore
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