The Economics Group of Wells Fargo Securities published a Special Commentary this morning on current Credit Quality. The information included in this report not only indicates the present environment for personal and business financing, but also includes information that can be used to develop an overview understanding of the current national economy.
Overall findings with the current report are not promising in terms of indicating potential short-term economic expansion or growth. Here are some highlights:
- Consumer credit balances have declined significantly over the 18 months, with April experiencing a modest $1 Billion increase. Revolving debt (i.e., credit card) balances are down nearly 10% compared to 12 months ago. Credit card delinquency rates are now below 6%, continuing to decline from historic highs reached in the past 2 years.
- Consumer spending is picking up with a modest 2.6% increase compared to 12 months ago. Median home prices are also still 1% below where they were a year ago, though this is an improvement from the 15% decline experienced in recent months.
- Total bankruptcy filings picked up slightly in the first quarter of 2010 due to a similar increase in personal filings. Levels are still below historic highs in 2005, prior to the implementation of bankruptcy reform laws.
- Consumer inflation remains stable at 2.2%. However, inflation for businesses (as measured by the Producer Price Index) is now at 5.5%.
- Private Wages & Salaries did pick up their growth rate slightly in the first quarter of 2010 at 1.5% (annual rate).
- Total loan delinquency rates are still growing, now 7.5% for the first quarter of 2010. Commercial delinquencies are not at 9.2%, continuing growth to levels last seen during the S&L Crisis of the early-1990’s. The largest annual growth in delinquencies has been in residential real estate loans, while the past quarter saw the largest growth coming from agricultural loans. Delinquencies are growing across all real estate categories, declining this past quarter for commercial & industrial and consumer loans.
- Annual retail sales growth reached 5.2% in April, though future forecasts of consumer activity have declined in most major purchase categories (homes, auto, appliances). Only about 11.3% anticipate personal income increases over the next 6 months.
- The Delinquency Plus Foreclosure rate declined to 14.01% for the first quarter of 2010, coming off record highs of around 15% in 2009. This is entirely due to a drop in historically-high delinquencies, while foreclosures continue to grow (now 4.63%).
- Approximately 16.4% of Subprime loans are now in foreclosure