Tuesday, 16 October 2012

US retail sales rise as household debt payments fall

Monday provided more evidence that the consumer is helping to hold up US economic growth. Retail sales rose 1.1 percent in September, with electronics sales in particular rising 4.5 percent.

Bloomberg has an article saying that consumers' better financial health puts them in position to boost the economy.

Three-plus years into a recovery from the worst financial crisis since the Great Depression, Americans finally are getting their finances back into shape, Federal Reserve figures show. Household debt as a share of disposable income sank to 113 percent in the second quarter from a record high of 134 percent in 2007 before the recession hit. Debt payments on that basis are the smallest in almost 18 years, while the delinquency rate for credit cards is the lowest since the end of 2008.

“The household deleveraging process is largely over,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Credit use should soon go from being a significant headwind to the economy to a tailwind.”

However, longer term, it is less clear that the deleveraging process is over.

Some economists, including Harvard University professor Kenneth Rogoff and former Fed official Nathan Sheets, say the deleveraging process still has years to run. While debt as a share of income has fallen from its peak, the second quarter’s 113 percent was above the 94 percent average since 1980.

Meanwhile, there was also good news from Europe on Monday, where Greek government bonds rose, pushing the 10-year yield 47 basis points down to 17.58 percent.

However, Japan on Monday published data showing that industrial production fell 1.6 percent in August, worse than the initially-reported 1.3 percent decline.

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