COMMENTARY Reading the financial tea-leaves makes one thing clear right now: The U.S. has multiple economic personality disorder. The signs are good! The signs are bad! We could call it A Tale of Two Cities Economy, except no one is mistaking this for the best of times. So here's a brief run-down on recent economic indicators that don't really seem to know if they are coming or going:
We're keeping up with our credit-card payments: Credit card write-offs were down 32 percent last year because U.S. consumers were able to make payments on time, according to Equifax. Bank credit card write-offs dropped 39 percent from 2010 to 5.53 percent , while retail credit card write-offs dropped 26 percent, to 8.4 percent.
We're buying more stuff than we can afford: We kept up with our credit-card payments by dipping into our personal savings, not by buying less. The U.S. personal savings dropped from about 5.5 percent at the start of 2011 to about 4 percent by the end of the year. At the same time, consumer credit card borrowing shot up. In November, U.S. consumer revolving debt, including credit card loans, rose by $5.6 billion. The previous month it had risen by $7.65 billion, according to the Federal Reserve.
Companies are stocking up: The value of U.S. business inventories rose 0.3 percent in November from October to an estimated $1.55 trillion, according to the Census Bureau. That marks the second consecutive monthly increase after inventories held steady in September.
Stocking up is all that propped up the U.S. GDP: Because increasing inventory counts as an economic activity, all that stockpiling is a major reason the U.S. managed its anemic 2.8 percent growth in GDP for December.
Consumers believe things are looking up: The Thomson Reuters/University of Michigan consumer sentiment index for early January increased to 74.0 after ending December with a reading of 69.9.
Consumers have changed their minds: Apparently it depends on who is doing the asking because The Conference Board Consumer Confidence Index is down to 61.1 for January from 64.8 in December. In this system 1985 = 100. How well do you remember 1985?
Foreclosure filings hit four year low: The number of U.S. homes receiving a foreclosure filing fell to a four-year low in 2011, according to RealtyTrac. This was because of the robo-signing fiasco, which forced banks to see if they actually have the legal right to foreclose on homes.
Home seizures may jump 25 percent this year: RealtyTrac expects a huge increase in foreclosures in 2012. This is because banks may have figured out legal strategies to address problems unearthed in the robo-signing fiasco.
CEOs are almost optimistic about the future: The Conference Board's Measure of CEO Confidence improved in the last quarter of 2011 to 49, up from 42 in the previous quarter. (A reading of more than 50 points reflects more positive than negative responses).
Most U.S. corporations are lousy credit risks: So why should we trust the CEOs, anyway? More than half of the U.S. companies rated by Standard & Poor now have junk ratings, up from 24 percent 30 years ago. Over the same period the number of triple A-rated non-financial US companies dropped from 61 to four.