Consumer Sentiment Rises 2.3 Points

Consumer confidence improved slightly in April to 69.8, a gain of 2.3 points over March, as reported by the University of Michigan Consumer Sentiment Index.

The current condition index held steady in April, while the future expectations index rose in April, although it is still below February’s levels of 71.6.

Short-term future expectations led the increase, with a gain of 4.6%, while long-term expectations lagged, with an increase of only 2.9%.

Consumers are still uncertain about the future as concerns about the labor market and increasing gas prices along with the U.S. deficit continue to weigh on the consumers’ psyche.



4.29.11 (Source: University of Michigan/Reuters)

Personal Income Up 0.5%; Consumption Up 0.6%

Personal income and spending rose in March, according to the Bureau of Economic Analysis.

Personal income increased by 0.5% in March, while consumer spending rose by 0.6% after an increase of 0.9% in February. Year-over-year, both personal income and consumer spending were also up. Personal income increased 5.3% year-over-year and consumer spending increased 4.6% year-over-year.

However, adjusting for price changes, real personal consumption rose by 0.2 percent in March compared to a 0.5 percent increase in February.

Consumer prices continued their increase, as measured by the consumer spending deflator, matching February's growth of 0.4%.



4.29.11 (Source: Bureau of Economic Analysis)

Economic Growth Slows in the First Quarter

Real gross domestic product (GDP) grew at an annualized rate of 1.8 percent in the first quarter of 2011 after posting a growth rate of 3.1 percent in the fourth quarter of 2010, according to data released today by the Bureau of Economic Analysis.

The deceleration in real GDP can be attributed to a sharp upturn in imports, a deceleration in PCE (personal consumption expenditures), a larger decrease in federal government spending, and decelerations in nonresidential fixed investment and in exports that were partly offset by a sharp upturn in private inventory investment.

Real personal consumption expenditures slowed in the first quarter growing at an annual pace of 2.7 percent compared with an increase of 4.0 percent in the fourth.

Real nonresidential fixed investment increased 1.8 percent in the first quarter, compared with an increase of 7.7 percent in the fourth. Investments in residential and nonresidential structures fell in the first quarter, mostly offsetting an increase in spending on equipment and software.

Spending by both the federal government and state and local governments fell in the first quarter. Spending on national defense fueled the drop in spending at the federal level declining by 11.7 percent.

Private businesses increased inventories $43.8 billion in the first quarter. The change in real private inventories added 0.93 percentage point to the first-quarter change in real GDP.

Real final sales of domestic product -- GDP less change in private inventories -- increased 0.8 percent in the first quarter, compared with an increase of 6.7 percent in the fourth.



4.28.11 (Source: Bureau of Economic Analysis)

Key Takeaways from Bernanke's 1st Press Conference

• Growth in the first quarter will be short of 2.0%, but 2011 should see overall growth between 3.1% and 3.3%. Economic growth will continue somewhat stronger (3.5%-4.0%) for 2012 and 2013. (See the Fed's forecast.).
  
• Bernanke noted that there was “quite a bit of uncertainty” in the forecasts of the FOMC participants, much of which was driven by global events.
  
• Inflation will be somewhat higher in 2011 (2.1%-2.8%) due to rising oil and other commodity prices, but will return to a more consistent longer-term trend of between 1.2%- 2.0% over the next two years.
  
• The Fed takes a “stock” view of monetary easing, meaning that the size of the Fed’s portfolio is what matters. While the Fed will cease securities purchases as planned at the end of the second quarter - thus stopping the growth of the balance sheet - the Fed will continue to re-invest maturing securities, keeping the Fed’s portfolio level constant.
  
  This means that the amount of easing should remain constant, despite no additional new securities purchases. Bernanke noted that the “trade-offs are less attractive” now for continuing [adding to] the quantitative easing already underway.
  
• Bernanke said that an “early step” of "policy tightening" would be to stop re-investing maturing securities. What was not said is that monetary policy would continue to be very accommodating. Moreover, a decision to stop re-investing would likely be a precursor to any increases in interest rates.
  
• Bernanke said that and “extended period” for maintaining the current low interest rates will be determined by conditions. He did say that it would likely be a couple meetings, meaning that nothing is likely until the Fall.
  

See the three parts of Bernanke's speech:
1. Opening Remarks


2. Q&A Part 1


3. Q&A Part 2

Homeownership Rate Sinks to Its Lowest Level in Over 12 Years

The Census Bureau announced that the homeownership rate in the first quarter of 2011 fell to its lowest level since the fourth quarter of 1998 at 66.4 percent.

The homeownership rate fell 0.1 percent from the fourth quarter of 2010 level and was 0.7 percent lower than the homeownership rate reported in the first quarter of last year. The homeownsership rate in the United States peaked in the fourth quarter of 2004 at 69.2 percent.

Additionally, the Census Bureau reported that the national vacancy rate for rental housing and homeowner housing were 9.7 percent and 2.6 percent in the first quarter, respectively.

The rental vacancy rate of 9.7 percent was down 0.9 percent from a year ago; but was up 0.3 percent from the last quarter. The homeownership vacancy rate was unchanged from a year ago and was down 0.1 percent from the fourth quarter of last year.

Read the press release.

FOMC Leaves Interest Rates Unchanged

The Federal Open Market Committee voted to keep the Federal Funds Target in a range between 0 and 25 basis points and to maintain its policy of purchasing $600 billion in long-term treasuries that was announced last November:

The FOMC acknowledged that commodities prices have been rising, but the committee continues to see stable long term inflationary expectations:

Inflation has picked up in recent months, but longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued.

This statement essentially continues the status quo and does not represent any significant change on the part of the Fed. The FOMC voted unanimously for the policy and statement.

April 27th Meeting	March 15th Meeting
Information received since the Federal Open Market Committee met in March indicates that the economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually. Household spending and business investment in equipment and software continue to expand. However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed. Commodity prices have risen significantly since last summer, and concerns about global supplies of crude oil have contributed to a further increase in oil prices since the Committee met in March. Inflation has picked up in recent months, but longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued.	Information received since the Federal Open Market Committee met in January suggests that the economic recovery is on a firmer footing, and overall conditions in the labor market appear to be improving gradually. Household spending and business investment in equipment and software continue to expand. However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed. Commodity prices have risen significantly since the summer, and concerns about global supplies of crude oil have contributed to a sharp run-up in oil prices in recent weeks. Nonetheless, longer-term inflation expectations have remained stable, and measures of underlying inflation have been subdued.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.	Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.
To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. In particular, the Committee is maintaining its existing policy of reinvesting principal payments from its securities holdings and intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.	To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.	The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.	The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

Case Shiller: Existing Home Prices Fall 1.1%; Down 3.3% From Year Prior

The decline in home prices continued in February with a drop of 1.1%, the same drop that was experienced in January. The year-over-year decline accelerated to 3.3% for the 20-city index. The 10-city index declined 2.6% on a year-over-year basis. One city, Washington, D.C., bucked this trend, posting a year-over-year increase of 2.7%.

The decline was expected, given weak sales and low housing starts, and may yet continue. Foreclosures are on the rise, complicated by uncertainty over the foreclosure process.



4.19.11 (Source: Standard & Poors)

New Home Sales Up from February; Still Very Weak

March new home sales, up 11.1% from February, remained astonishingly weak on a historical basis. Sales were the lowest March reading on record at an annualized 300,000 units. Sales remain slightly below the January level and were 21.9% below the March 2010 level.

The slight improvement from February pushed the months’ supply of inventory down from 8.2 to 7.3 in March. The ratio remains quite high despite home builders doing a lot in recent years to reduce their inventories. A healthy market has around 4-5 months’ supply.

Reflecting increased sales, the median sales price rose 5.3% from February to $217,200. From a year prior, the median sales price was 4.9% lower.

ABA's Chief Economist Jim Chessen commented that “despite housing being incredibly affordable, new home sales continue to bounce around historic lows. Households remain cautious about the economy and are hesitant to pull the trigger on major purchases, such as a new home.”

Existing Home Sales Increase 3.7%; Can't Make Up for February's Drop

Although existing home sales increased in March to an annualized pace of 4.9 million units, a modest increase of 3.7%, the increase wasn't able to make up for the drop of 8.9% in February. Sales are still below the pace of January.

The increased paced helped decrease the months supply of inventory to 8.4 months from 8.5 months. A high inventory like this is often associated with decreasing home prices. Indeed, the year-over-year median home price moved down 5.9%.

Housing Starts up 7.2%; Construction Permits Still Low, But Rising

Total housing starts gained 7.2% last month, over a March number that had already been revised upward. The gains were led by a 32.3% jump in the Midwest; all regions showed gains except the South, which experienced a slight decrease of 3.3%. These increases helped to regain ground that was lost in February, when housing starts plummeted.

While construction permits are still low - down 13.3% year-over-year - permits increased over February 5.7%. Permits are not expected to increase until housing sales show sustained increases. Existing home sales statistics will be released tomorrow from the National Association of Realtors.



4.19.11 (Source: U.S. Census Bureau)

FDIC Pushes Ahead With Authority to Change Large Bank Assessments

Despite ABA objections, the FDIC continues pushing for more authority to arbitrarily raise the assessment rates for large institutions, and has proposed guidelines that would govern assessment-rate adjustments under the new pricing system for banks with more than $10 billion in assets.

ABA has developed an analysis of the proposal. The large-bank pricing rule went into effect in the second quarter, and it authorizes the FDIC to adjust an institution's total score by 15 points, up or down.

The proposed guidelines, which the FDIC issued Tuesday, describe the process that the FDIC would follow to determine whether to make an adjustment, to determine the size of any adjustment, and to notify an institution of an adjustment.

The guidelines also provide examples of circumstances that might give rise to an adjustment. There will be a 45-day comment period on the proposed guidelines after their publication in the Federal Register.

Read the staff analysis.
Read the proposed adjustment guidelines.

Industrial Production Up 0.8%, Manufacturing Output Up 0.7%

Industrial production increased more than expected, reaching an increase of 0.8%. After the slight dip in February was revised upward to 0.1%, this is now the fifth month of gains. There was growth in all categories measured by the survey, so there is hope that manufacturing will lead the recovery.

The Federal Reserve acknowledged that the earthquake and tsunami in Japan may cause a small slowdown as the supply chain has been disrupted; however, the broad-based strength is expected to continue.

The rate of capacity utilization for total industry rose 0.5 percentage point to 77.4 percent, a rate 3.0 percentage points below its average from 1972 to 2010.



4.15.11 (Source: Federal Reserve)

CPI Up 0.5%; Core Prices Up 0.1%

For the fourth month in a row, the month-over-month CPI rose a hefty 0.5%. Energy and food price increases continued to drive the growth, accounting for almost 3/4 of the overall CPI growth. Core CPI, which excludes food and energy, was up slightly, 0.1%, led by increases in some transportation indexes, shelter, and medical care.

Year-over-year CPI was up 2.7%, continuing the acceleration it has been experiencing over the past several months. Core CPI also accelerated on a year-over-year basis, rising 1.2%.



4.15.11 (Source: Bureau of Labor and Statistics)

Fed’s Duke Addressed Myth That Banks Aren’t Lending

Federal Reserve Governor Betsy Duke addressed the continued myth that banks aren’t lending, specifically to small businesses. Duke explained that bank loans are not the typical source of capital for start ups; rather, loans are utilized to grow operations and make investments. In these instances, most businesses received the loan they applied for, said Duke:

The turndown rate was fairly modest--about 12%. Moreover, for those small business owners who received credit, more than 90% of those surveyed actually received as much credit as they had requested.

The perception that banks aren’t lending isn’t supported by the data and has likely deterred potential borrowers from even applying. Duke continued:

[During the crisis,] less than 5% of small business respondents typically identified interest rates and credit conditions as their most important problem. In contrast, 25% or more of small business owners considered weak demand the most important concern during much of the past three-year period...

[Concerns about] future sales seem to be more important than expectations about the availability of credit in driving business spending decisions and demand for business loans.

Duke pointed out that most small businesses - more than 70% - are started with personal savings and assets, while just 3% were started with a business loan from a bank. The decline in wealth during the financial crisis constrained the creation of new startups; however, wealth has recovered over 90% of its decline, easing the strain and supporting the recovery.

See Duke’s full speech.
See ABA’s update on lending conditions.

ABA's Matthew Williams: Ag Credit Concerns Overblown

ABA Vice Chairman, Matthew Williams, chairman and president of Gothenburg State Bank in Gothenburg, Nebraska, testified on behalf of ABA before the Subcommittee on Department Operations, Oversight, and Credit of the House Committee on Agriculture. He said that banks in every state of the country are actively looking for good farm and ranch loans to make, and that farm and ranch lending actually increased from 2007 through 2010 by over $13 billion.

Williams said that concerns over an asset bubble in this sector are overblown:

It is clear that farm land prices have escalated in some areas of the country, but there is no evidence that this is being fueled by credit. Farmers are responding to market signals, and those signals are extremely positive...Prosperity is driving the demand for farm land and retained earnings are providing the cash to purchase it

Williams also called attention to the “resounding success” of guaranteed farm loan programs offered by the USDA’s Farm Service Agency (FSA), but urged Congress to support extending the deadline on FSA guaranteed loan term limits, which restrict the period during which farmers and ranchers are eligible for such programs.

Williams said that bankers are concerned about the potential risk the Farm Credit System poses to the rural economy and pointed to the FCS’ Investment Bond pilot program as an example. He noted that it has been used to divert capital owned by farmers and ranchers into commercial projects which have no direct connection to the farmer-owners of the FCS:

This puts farmer owned capital in jeopardy. If Congress intended for the FCS to finance hotels, dental clinics, and general manufacturing, it would have provided that authority to the FCS.

Williams urged the Committee to terminate the program.

Finally, Williams said that the banking industry is well positioned to continue being a source of financial strength for local communities. However, he said the “massive weight of new rules” emanating from Dodd-Frank puts banks’ ability to do so in jeopardy:

Historically, the cost of regulatory compliance as a share of operating expenses is two and a half times greater for small banks than for large banks. Increased compliance costs increase the cost of borrowing, which will not help revive the economy.

Read Williams’ testimony.

PPI: Headline Prices Up 0.7%; Core Prices Up 0.3%

In March, the Producer Price Index for finished goods was up 0.7% from February. As with recent months, most of the increase is due to price increases in energy products, which rose by 2.6%.

Core prices rose 0.3% from the prior month. Almost 1/3 of this increase was due to increases in the price for light trucks, with passenger cars contributing as well. Core prices were up 2.0% from the prior year, the fourth consecutive YOY increase.

The continued increase suggests that pass-through of prices is catching on as the economic recovery continues across the U.S.



4.14.11 (Source: Bureau of Labor Statistics)

Beige Book Reveals Recovery Broadening

The Federal Reserve Released its Beige Book today, which shows that economic recovery continues across the U.S., with all 12 Fed districts reporting improvements. The improvements reach into all economic sectors – consumer spending, tourism, transportation, manufacturing, and labor markets. Even housing has seen some improvement in a few districts, although improvements in the housing market are definitely mixed. Commercial construction, too, is still heavily impacted, and is likely to remain so for some time, although some increases in the usage of commercial space were noted, particularly in healthcare and manufacturing.

All districts noted some level of impact from the recent earthquake and tsunami in Japan, as manufacturers express concern about supply chain interruptions.

All states but two are officially in recovery. The two remaining are Mississippi and Nevada.

Wage pressures were described by most districts as weak or subdued, but higher commodity costs were widely reported to be putting increasing pressures on prices. Energy prices were cited most often, but raw materials in general were an increasing concern of businesses. The ability to pass through cost increases varied across districts, with manufacturers generally finding less resistance to price increases than either retail or construction (where weak demand was a limiting factor).

Loan demand was either unchanged or up slightly in most districts.

4.13.11 (Source: Federal Reserve)

Retail Growth Slows; Mixed Expectations for Near-Term Sales

Although retail sales in the U.S. rose in March for ninth straight month, a year-over-year gain of 7.1%, this was the slowest growth rate since August. Lower-than-expected growth rates are leading some forecasters to predict that the next couple months for the economy could be choppy. Although the March month-over-month growth was less than February, February had been revised upward.

Since most components of retail sales experienced gains, consumer spending appears to not yet be affected by increasing gas prices, although that could begin to happen in the coming months.



04.13.11 (Source: US Census Bureau)

FDIC: Improvement in Insurance Fund Reflects Conditions of Industry

The FDIC released an updated forecast for the Deposit Insurance Fund, reflecting improvement in the industry’s health, including:

• three quarters of improving asset quality;
• four quarters of positive net income; and,
• $240 billion increase in equity capital since 2008.

Deposit Insurance Fund Improvement
The Deposit Insurance Fund has reflected improvement in the industry’s conditions. Following several quarters of decline and a negative $20.9 billion balance at the end of 2009, the fund has grown for the last four quarters to a negative $7.4 billion balance at the end of 2010.

The industry will pay approximately $13 billion in assessments this year, pushing the fund to a positive balance by year-end. The fund is expected to continue improving over the next several years and reach 1.15% of insured deposits in 2018. The fund’s improvement is expected to meet deadlines established by the Dodd-Frank Act.

Bank Failure Costs Decline
The improving health of the industry and increased equity cushion, now totaling over $1.5 trillion for the industry, will equate to fewer bank failures. The FDIC estimates that failure costs from 2011 through 2015 will total $21 billion, compared to the over $76 billion in failure costs from 2008 through 2010. The forecast reflects a $7 billion improvement from the FDIC’s outlook of last October.

Refund Excess Prepaid Assessments
The FDIC reported that its cash and liquid assets, including the remaining prepaid assessment balances, premiums to be paid, and recoveries from failed bank assets, would be sufficient to meet its obligations over the next five years. ABA has urged the FDIC to closely monitor its cash needs and return any excess prepaid assessments.

Changes in assessments, including the new assessment base and elimination of the planned 3 basis point rate hike, mean that banks prepaid considerably more premiums at the end of 2009 that they can reasonably expect to pay through 2013. Freeing up these non-interest-earning assets would be beneficial to the industry and the communities they serve.

Read the FDIC’s update.

NFIB: Decreased Optimism, But Some Glimmers of Hope

A small decrease in the small business optimism index of 2.6 points reveals that small businesses are concerned about the future. This is reflected in generally low results in many areas of the survey:

• Recession-level lows in employment
• Recession-level lows in capital spending
• Decrease in business owners reporting increased sales
• Increase in owners reporting increased selling prices for goods and services

Still, several of these areas are showing some signs of hope:

• The "hard components" of optimism increased two points: job creation, job openings, capital spending plans and inventory plans.
• The number of business owners reporting capital outlays over the last six months increased 2 percent.
• Gains in profits and wages are the strongest since Q4 of 2008.

Overall, 93 percent of business owners reported that all their credit needs were met or that they were not interested in borrowing. Only eight percent reported financing was more difficult to get, a decrease of 3 points from last month. The NFIB report commented on small business credit:

Credit availability is not holding back loan growth, it is a lack of demand.

Read the report.

Consumer Credit Expansion Driven By Nonrevolving Credit

The Federal Reserve reported that consumer credit grew at annual rate of 3.8% in February to almost $2.42 trillion, driven by growth in nonrevolving credit, which continued to outpace a contraction in revolving credit. This was the fifth consecutive monthly increase in total consumer credit.

Revolving credit fell in February for the second month in a row, after posting its first monthly increase in December 2010. In 28 of the last 30 months, outstanding revolving credit has declined.

In February, revolving credit contracted by 4.1% (annualized rate) to $794.0 billion. Revolving credit remains at its lowest level since Fall 2004.

Nonrevolving credit grew at an annual rate of 7.7% in February. This was the seventh consecutive monthly increase in nonrevolving consumer debt.

Read the G. 19 report.

ISM Non-Manufacturing Index Down 2.4 Points to 57.3 – Service Sector Growth Modestly Slower

In March, the Institute for Supply Management's Non-Manufacturing Index fell by 2.3 points to 57.3. The decline ends a six month improvement trend. Despite the drop, the index still remains strong. A value over 50 denotes service sector activity growth. So a the decline still represents expansion, but just at a slower pace than what occurred in February. Recovery is continuing.

Looking at the details of the report, output growth and employment growth slowed down. The output component fell 10.2 points to 59.0, while the employment component fell 1.9 points to 53.7. The forward looking indicators however, remained stable or even improved further. New orders fell only 0.3 point to a still strong 64.1 and backlogged orders rose 4.0 points to 56.0. Unless there are significant negative future economic shocks, it appears that service sector growth will continue at a solid pace in the upcoming months.

>50 = expansion	Mar	Feb	Jan	Dec	Nov	Oct
Headline Index	57.3	59.7	59.4	57.1	56.0	54.6
Business Output	59.7	66.9	64.6	62.9	59.4	58.5
Exports	59.0	56.5	53.5	56.0	59.5	55.5
Employment	53.7	55.6	54.5	52.6	53.6	52.1
New Orders	64.1	64.4	64.9	61.4	58.5	56.6
Backlogged Orders	56.0	52.0	50.5	48.5	51.5	52.0

Office Market Recovering

The market for office properties reported improved fundamentals, according to a data from Jones Lang LaSalle. Rents were up and vacancy rates were down in the first quarter.

The net absorption of office space in the first quarter of 2011 was 4,314,563 square feet. This compares favorably to a negative net absorption of office space in the first quarter of 2010 of almost 3.3 million square feet of office space.

Jones Lang LaSalle reported that the vacancy rate for office properties has fallen for two consecutive quarters from 18.7% in the third quarter of 2010 to 18.4% in the first quarter of 2011.

In addition, rents increased by 0.7% in the first quarter of 2011 to $27.39 per square foot.

ABA: Consumer Loan Delinquencies Fell in the Fourth Quarter

There was broad-based improvement in consumer loan delinquency rates in the fourth quarter of 2010, according to the American Bankers Association's Consumer Credit Delinquency Bulletin.

Nine of the eleven loan categories reported lower delinquency rates for the quarter, as measured by the percent of accounts 30 days or more past due.

Bank card delinquencies dropped 36 basis points to 3.28% of all accounts and have declined in five of the last six quarters. As a result, the bank card delinquency rate is at the lowest level in almost a decade and well below the 15-year average of 3.92%.

The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, fell to 2.68% of all accounts in the fourth quarter, an improvement of 33 basis points compared to the previous quarter.

ABA Chief Economist James Chessen called the news encouraging and attributed the lower delinquency rates to an improving jobs market and consumers doing a better job in managing their debts.

Chessen said: "When people have jobs, they can spend more and pay their bills on time."

Looking towards the first quarter of 2011, Chessen cited that world events have created some uncertainty that could hamper the ability of consumers to continue paying their bills on time.

“I’m feeling hopeful about further declines in delinquencies because of continuing job growth,” Chessen said, “but the unknowns are the impact of higher gas and food prices. The two percent reduction in federal payroll taxes that began in January was intended to boost discretionary income. Unfortunately, rising prices have dashed any chance of that,” he added.

See the full press release.
See the historical fact sheet.
See the economic charts.

Debt Limit to Be Reached by May 16

The debt limit will be reached no later than May 16, 2011, according to a letter sent Congress by Treasury Secretary Tim Geithner.

Geithner wrote that if the debt limit is not raised by May 16, the Treasury can take certain extraordinary measure to temporarily delay the date that the United States would default on its obligations. However, these extraordinary measures would be exhausted after approximately eight weeks or around July 8, 2011. "At that point the Treasury would have no remaining borrowing authority."

Geithner states that he would prefer not to take these extraordinary measures. He warns that the longer Congress fails to act on raising the debt limit, the United States is running the risk that "investors here and around the world will lose confidence in our ability to meet our commitments and our obligations."

Read the press release.

Payrolls Up 216,000; Unemployment Rate Down Slightly to 8.8%

The Bureau of Labor Statistics reported that non-farm payroll employment rose by 216,000 in March. This follows a slightly revised gain of 194,000 in February (previously reported to be 192,000). The month’s payroll gain was the strongest since the Census Bureau hiring of last year. Private sector employment rose by 230,000. This was a similar to the pace seen in February.

Jim Chessen, ABA Chief Economist stated, “Though it is likely that job growth will vary month to month going forward, private sector hiring activity is now at the point where it is starting to chip away at unemployment. This is an encouraging development.” It takes about 150,000 jobs created each month in order to absorb new labor market entrants.

In March, the unemployment rate fell 0.1 point to 8.8%. Though the payroll growth seen in March is consistent with a modest unemployment rate decline, the drops that occurred a few months ago are not likely as positive of an indication. About three quarters of a million people left the labor force from November to January. This is likely due to increased levels of discouraged workers. The labor force participation rate remains at a cyclical low of 64.2%. If this rate begins to move upward back to a historical norm, even will solid payroll growth, the unemployment rate may stay high in the near to intermediate term.

	Mar	Feb	Jan	Dec	Nov	Oct
Payroll Change (000s)	216	194	68	152	93	171
Goods Producing	31	73	38	4	8	1
Services	185	121	30	148	85	170
Private Sector	230	240	94	167	128	143
Unemployment Rate	8.8	8.9	9.0	9.4	9.8	9.7
Labor Force Particip. R.	64.2	64.2	64.2	64.3	64.5	64.5

Construction Spending Falls 1.4% – Residential, Public Sector Cause Decline

New construction spending fell for the third straight month in February, 1.4% on a seasonally adjusted basis. These three months follow a brief period of modest construction spending growth last fall. The month’s decline was primarily due to a sharp drop in residential construction, which fell 3.7% over the month. This decline completely reversed a similarly sized increase in January. Private, non-residential spending rose by 0.9%, following a sharp decline of 8.0% in January. Public sector spending continued its recent trend declining expenditures, falling 1.3% over the month. Construction spending is still failing to find a bottom.

On a year-ago basis, total construction spending was 6.4% lower. Private residential spending was down 8.1%, and private non-residential spending was down 13.2%. Public sector spending was up 0.5% from a year earlier.

m/m % change	Feb	Jan	Dec	Nov	Oct	Sep
Total	-1.4	-1.8	-3.2	0.1	1.1	1.2
Private Residential	-3.7	3.6	-3.5	1.2	4.0	1.2
Private Non Res.	0.9	-8.0	-3.3	2.6	0.7	2.0
Public	-1.3	-0.5	-2.9	-2.6	-0.7	0.6

ISM Manufacturing Index Down 0.2 Point to 61.2 – Forward Looking Components Soften

The Institute for Supply Management's Manufacturing Index fell back slightly by 0.2 point in March to 61.2. Despite the modest decline, the index value is still very strong. Any value over 50 indicated manufacturing sector activity growth. Therefore, the softening of the index represents a slightly slower growth rate. Manufacturing activity continues to be one of the leading sectors of recovery.

With that said however, the details of the report indicate that the robust growth seen in manufacturing may soon be moving into a phase of more modest expansion. The forward looking components softened considerably. New orders fell 4.7 points to 63.3 and backlogged orders fell 6.5 points to 52.5. These are still strong, but are a significant deceleration. Changes in inventories also remained below the expansionary threshold for the second straight month, possibly indicating slower anticipated future demand growth. The report as a whole should be interpreted in a positive light, showing continued manufacturing strength; however, the fastest phase of growth may be slowing down somewhat.

> 50 = expansion	Mar	Feb	Jan	Dec	Nov	Oct
Activity Index	61.2	61.4	60.8	58.5	58.2	56.9
Production	69.0	66.3	63.5	63.0	58.2	61.4
Employment	63.0	64.5	61.7	58.9	59.0	57.9
New Orders	63.3	68.0	67.8	62.0	59.6	59.9
Export Orders	56.0	62.5	62.0	54.5	57.0	60.5
Backlogged Orders	52.5	59.0	58.0	47.0	46.0	46.0
Inventories	47.4	48.8	52.4	51.8	56.1	53.2