Thursday, June 3, 2010

Consumer Metrics Institute Personal Finance Index Declines for Sixth Consecutive Week

Richard Davis at Consumer Metrics Institute, who is doing the most creative, original,  aggregate data collection work in the economic industry,  bar none,  has emailed me his latest data. The data is far from the rosy scenario of the backward, ancient, politicized, bureaucratic data collection of government agencies:

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.

See the index here.

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%.

See this index here.

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.

See the commentary here.

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.

See the data here.

A more telling development would be for a similar upturn in consumer interest in new loans, which we have not seen. In fact the year-over-year change in consumer interest in new loans has dropped to the lowest level we have ever recorded, slightly surpassing the previous low set back in August of 2008.

See the data here.

If there is a strengthening recovery, we are not seeing clear signs of it.In fact, we could argue that most consumers are increasing their already substantial caution about taking on new debt, while others are exploring their legal options should their current debt loads become harder to manage.

Our data is significantly upstream economically from the factories and the products measured by the GDP, putting us far ahead of the traditional economic reports.

A PDF covering our methodologies is here

The indexes themselves can be found here.

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