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Monday, May 17th, 2010

Consumer Borrowing, Retail & Median Home Prices Boost Economy

Government groups have published numbers for various economic indicators for March and April (such as unemployment and bankruptcy data), giving a little insight into how our nation’s economic situation is changing. Here’s a summary of a few of these telling figures.

Consumer Borrowing Up in March

Since February of 2009, consumer borrowing in the U.S. has reportedly been falling, as we collectively try to claw our finances out of the red.

But March 2010 showed a surprising increase in consumer borrowing—a $1.95 billion increase, according to sources, which far outstripped the $3.85 billion loss many experts expected.

The increase could be a fluke, but it could equally be a sign that American households are becoming more optimistic about spending money.

Retail Rises Slightly in April

Retail sales blossomed in March, thanks in part to an early Easter. April’s numbers represent smaller growth, but growth nonetheless:

  • March retail sales saw a 7.9 percent increase over sales in March of 2009.
  • April retail sales grew only 0.5 percent compared with those a year earlier; however, in April 2009, sales decreased 2.7 percent from the previous year.
  • Combined sales in March and April increased by 4.8 percent; January and February sales increased by only 3.3 and four percent.

While the slower growth in April may seem like cause for concern, many analysts are not worried, pointing to the fact that some growth occurred and that this year’s early Easter likely shifted people’s shopping patterns.

And, as one commentator in a recent New York Times article notes, economic recoveries don’t always happen linearly.

Median Home Prices

NPR reported this week that median home prices are on the rise in about 60 percent (91 out of 152) of the country’s cities surveyed.

This marks significant improvement from the final quarter of 2009, when only about 40 percent of median home prices were rising. Here’s a look at some of the hard numbers:

  • 36 percent of all first-quarter sales were foreclosures and other distressed properties;
  • Nationally, the median price was $166,100, about 0.7 percent below the median price in the first quarter of 2009;
  • Prices jumped significantly in Saginaw, MI; Akron, OH; and Cleveland, OH; and
  • Prices fell significantly in Orlando, FL; Ocala, FL; and Cumberland, MD.

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Saturday, December 12th, 2009

Personal Finance News Roundup: 12/12/2009

This week, many November numbers about money and credit were released, with some surprising findings. Here’s a summary of a few important figures.

November Consumer Bankruptcy Filings Down 18 Percent

The American Bankruptcy Institute (ABI) reports that personal bankruptcy filings decreased 18 percent last month, compared to October’s numbers. Specifically:

  • Total filings: 112,152 consumers filed for bankruptcy in November 2009, compared with 135,913 in October.
  • Increase from 2008: A year ago, in November 2008, 99,925 consumers filed for bankruptcy. This year’s figure represents a 12 percent jump.
  • Chapter 13 filings: Only 29 percent of consumers who filed for bankruptcy did so under Chapter 13 of the U.S. Bankruptcy code last month, a rate unchanged from October.
  • Yearly estimate: Sources predict that total bankruptcies in 2009 will total more than 1.4 million.
  • Rate of cyber fraud: Of all online sales, 1.2 percent were found to be fraudulent in 2009, the lowest figure recorded in the 11 years CyberSource has been keeping track.
  • Online revenue lost: This year, $3.3 billion was lost to cyber fraud, compared to $4.0 billion last year and $3.7 billion in 2007.
  • Some areas still problematic: Online sales of electronics still have fraud rates approximately double those of other retailers.

Retail Sales Drop Surprise 0.3 Percent in November

However, this figure is not considered comprehensive, and will be reevaluated after the government releases its sales data on December 11th. Still, the initial figure has some retailers worried that this year’s holiday shopping season will mirror last year’s, when many Americans were holding onto their money after the tumult of the stock market’s crash.

The retail figures, quoted in an msnbc.com article, apparently don’t include online sales, sales from electronics chains or sales from Wal-Mart Stores, Inc., three groups the government’s figures will cover.

Report: Online Fraud Down Overall

In a survey out this month on online scams, the security company CyberSource reports that web fraud has decreased by about 18 percent in the United States in Canada since 2008. Here’s a closer look at the findings:

  • Rate of cyber fraud: Of all online sales, 1.2 percent were found to be fraudulent in 2009, the lowest figure recorded in the 11 years CyberSource has been keeping track.
  • Online revenue lost: This year, $3.3 billion was lost to cyber fraud, compared to $4.0 billion last year and $3.7 billion in 2007.
  • Some areas still problematic: Online sales of electronics still have fraud rates approximately double those of other retailers.

The dip in fraud doesn’t mean you should be any less vigilant when shopping online, though. Be sure to guard your credit card numbers carefully and only shop on secure web sites!

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Friday, December 11th, 2009

Federal Reserve Proposes New Limits on Store Credit Cards

According to the Wall Street Journal, the Federal Reserve has proposed new regulations that would restrict retailers' ability to issue store-specific credit cards. Many major retailers, it seems, are not happy about the prospect.

Prove You Can Pay

The new proposal, if adopted, would require store-card applicants to prove their ability to pay their bills when they apply for their cards. Many commentators believe this would amount to presenting a pay stub before being able to fill out a form.

  • Based on the Credit CARD Act: One provision of the Credit CARD Act of 2009, set to take full effect in February 2010, requires lenders to verify that borrowers are capable of repaying loans before lending money. The proof of income requirement for in-store cards is, apparently, an application of this provision. This may help prevent future bankruptcy filings, as borrowers may be less likely to take on more debt than they can handle.
  • Displeasure from retailers: Perhaps unsurprisingly, retailers are less than thrilled about the potential for this rule to change the way they operate. Many retailers currently offer tempting incentives to shoppers to open store cards, including one-time discounts and rewards programs.
  • Support form consumer advocates: On the other side of the coin, though, those concerned primarily with consumer rights have hailed the proposed measure as an important move toward limiting too-easy credit.

How Well Do We Pay?

So how likely are Americans to default on their store-specific cards? Sources indicate that store-branded (also called private-label) cards tend to be higher than general purpose plastic.

This makes sense: if you’re struggling financially and only able to make payments on some of your cards, it’s smarter to stay current on cards that can be used at a variety of locations rather than on one that’s only good at a single retailer.

But, it seems, even this less-than-stellar track record doesn’t make retailers eager for a change. Here’s why:

  • Sales volume: WSJ reports that Macy’s, one major retailer that issues a store card, saw more than half of all its sales bought on store cards in Q3 of this year.
  • Salary is a private matter, and few Americans are likely to be comfortable with handing evidence of their income to a stranger behind a register, no matter how much they make.

The Federal Reserve has not yet announced when this proposed rule will be completed.

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Friday, August 28th, 2009

Recession Changing the Face of Retail?

After decades of continuous consumption and expanding credit, Americans are now learning a new way to shop.

And many retailers are suffering because of it.

Well, Maybe Not…

According to an article from the Associated Press, U.S. retailers have seen a jump in shoppers who decide against purchasing one or more item before they reach the checkout counter.

It’s apparently happening everywhere from the grocery store to upscale clothing outlets, and it’s affecting retail in two major ways:

  • Decreased consumer spending: When we buy less, companies pull in less revenue. And these days, it seems like no company is immune to the belt-tightening undertaken by the American people. But that’s not the only way abandoned purchases hurt retailers.
  • Increased labor costs: When we leave those iced oatmeal cookies in the dairy aisle, realizing we need milk but only want the sweets, someone has to put them back with the desserts. And, sources indicate, retailers have seen higher labor costs because of all the restocking such behavior requires.

Tightened Credit Means the Revival of Layaway

It’s no wonder that we’ve become more cautious about lugging a lot of stuff to the checkout counter: nowadays, many credit card issuers will deny over-limit purchases rather than allow them to go through and charge a fee.

And, because of the shrunken credit market, many retailers are reporting an upswing in layaway, which allows consumers to make gradual, interest-free payments and pick up items when they’re paid in full.

  • K-Mart shoppers have reportedly taken to buying even low-cost items on layaway, including pencils, notebooks and other back-to-school supplies.
  • Sears Holdings apparently re-introduced its layaway program, which had been defunct for twenty years. Sources indicate that the company will also bring back its Christmas Club savings accounts for shoppers interested in saving money for gifts.
  • Google Insights for Search reports that the search term “layaway” was twice as popular among U.S. users this August than a year ago.

Have you scaled down your spending, but you still can't make ends meet? It may be time to consider filing bankruptcy.

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