Tuesday, 15 September 2009 01:00

Leading Indicators

U.S. Credit-Card Defaults Resume Ascent as Unemployment Worsens

JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc., the biggest U.S. credit- card lenders, said defaults climbed in August as the unemployment rate jumped and the impact of tax refunds waned.

American Express Co. was the only one of six card-issuers releasing data today to report an improvement in the rate of both defaults and delinquencies, a signal of future write-offs.

The industry’s data may signal that the second quarter’s improvement will be short-lived as tax refunds and federal efforts to stimulate the economy run out. Defaults tend to track the jobless rate, which dipped in July for the first time since the start of the recession before resuming its climb to 9.7 percent in August.

The crisis—one year on: McKinsey Global Economic Conditions Survey results, September 2009

A year after the global economic system nearly collapsed, many companies are finally finding ways to increase profits under the new economic conditions. But almost as many expect profits to continue falling, and executives also indicate that their broader economic hopes remain fragile. Many expect more government involvement in economies and industries over the long term.

September 2009MetroMonitor: Tracking Economic Recession and Recovery in America’s 100 Largest Metropolitan Areas

The American economy continued to weaken during the months of April, May, and June 2009, but it was no longer in free fall. Employment remained on a downward path—the nation lost nearly 1.3 million jobs during those three months alone—and by June, the national unemployment rate had reached its highest rate in more than 15 years, at 9.5 percent. But the pace of economic decline also slowed during the second quarter. Real Gross Domestic Product (GDP) shrank at an annualized rate of 1 percent, far less than the 6.4 percent rate of contraction during the first quarter of the year. And signs began to emerge that the housing market was stabilizing, with sales of both new and existing single-family homes rising throughout the spring.

Notice how employment change seems to track residential real estate pricing weakness throughout the country...

The map below displays, for the 100 largest metro areas, the change in the Federal Housing Finance Administration’s House Price Index—which measures the prices of single-family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac—from the same quarter in the previous year to the most recent quarter (because the index is not seasonally adjusted).

Obviously, ditto for REO's and the actual umemployment rate, consequently leading to lower metropolitan product produced...

The maps below display, for the 100 largest metro areas, the share of all mortgageable properties in the last month of the most recent quarter that have been foreclosed, failed to sell at auction, and are owned by the lending institution, and the change in that share over the prior 3 months.

The maps below display, for the 100 largest metro areas, the change in gross metropolitan product (GMP)--the total value of goods and services produced: (a) from each metro area’s peak GMP quarter to the most recent quarter, measuring the extent to which output has recovered from the recession’s full impact; and (b) from the previous quarter to the most recent quarter, measuring whether metropolitan output is moving toward recovery.

So. what should be bring home from this? Well, if residential real estate prices keep falling there is a very strong likelihood that the local economies will follow suit. Who among you reading this blog actually believe that prices can rise, on a seasonally adjusted basis, with the foreclosure pipeline jammed packed - forcing downward pressure on both organic sellers, new home builders and competing REOs?

Notice how independently sourced data tends to run counter to that released by the government in terms of a rosy, green shoots outlook...

Last modified on Tuesday, 15 September 2009 01:00