New consumer confidence numbers out show exactly what we didn’t want to see in the debt relief space. Consumer confidence has dropped to near record levels at 44.5 on the Conference Board Consumer Confidence Index.
Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumer confidence deteriorated sharply in August, as consumers grew significantly more pessimistic about the short-term outlook. The index is now at its lowest level in more than two years (April 2009, 40.8). A contributing factor may have been the debt ceiling discussions since the decline in confidence was well underway before the S&P downgrade. Consumers’ assessment of current conditions, on the other hand, posted only a modest decline as employment conditions continue to suppress confidence.”
Consumers’ appraisal of present-day conditions weakened further in August. Consumers claiming business conditions are “bad” increased to 40.6 percent from 38.7 percent, while those claiming business conditions are “good” inched up to 13.7 percent from 13.5 percent. Consumers’ assessment of employment conditions was more pessimistic than last month. Those claiming jobs are “hard to get” increased to 49.1 percent from 44.8 percent, while those stating jobs are “plentiful” declined to 4.7 percent from 5.1 percent.
Consumers’ short-term outlook deteriorated sharply in August. Those expecting business conditions to improve over the next six months decreased to 11.8 percent from 17.9 percent, while those expecting business conditions to worsen surged to 24.6 percent from 16.1 percent. Consumers were also more pessimistic about the outlook for the job market. Those anticipating more jobs in the months ahead decreased to 11.4 percent from 16.9 percent, while those expecting fewer jobs increased to 31.5 percent from 22.2 percent. The proportion of consumers anticipating an increase in their incomes declined to 14.3 percent from 15.9 percent.
The reason this is bad news for the debt relief space is because consumers that are hesitant about the future are less likely to go out and load up on debt that will later need to be addressed by some form of debt relief.
On top of this sour confidence outlook, TransUnion is reporting their Credit Risk Index (CRI) declined for the sixth consecutive quarter as consumers continue to pay off their outstanding debt and maintain low delinquency levels on their credit obligations.
A recent observation some have made is that credit applications are up so that is a indication of new credit but TransUnion addresses that as well.
TransUnion’s Total Inquiry Index (TII), which measures the demand for consumer credit benchmarked to consumer-initiated credit inquiries levels observed in 2000, increased to 68.93 in the second quarter 2011. Although the demand for credit remains low when compared to 2000 benchmark levels, the annual increase in the TII during the second quarter of 2011 was 0.7 percent. TII levels increased across most major categories monitored, especially inquires from finance and sales finance companies. Lending activity from these sectors generally reflects sales of consumer durable goods such as electronics, appliances and furniture.
“Lenders are making new credit available to an increasing percentage of consumers, who in turn are conservative with their use of it,” said Wiermanski. “Continued responsible use and repayment of credit by consumers during the rest of 2011 should modestly improve the CRI to levels witnessed just prior to the early stages of the credit and mortgage crisis,” added Wiermanski.
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