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Demos, a research think tank promoting economic equity, just released a report created from its survey of American credit card use. Unfortunately, the findings are unsettling.
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Rising Consumer Confidence a Good Indicator of Economic Recovery?
Last week the Federal Reserve released numbers for the last quarter of 2011, and the report looks like consumer confidence may be increasing at the start of 2012. Some of the highlights of the report are:
1. Consumer borrowing in the U.S. rose more than forecast (an increase of 7.75 percent) in December, boosted mostly by auto and student Loans.
2. Credit Card debt rose 4.5 percent to $801 billion after falling 2 percent the previous quarter.
3. Consumer credit increased by $19.3 billion (to $2.5 trillion).
Consumers' willingness to borrow at rates higher than the previous 4 years suggests that the economy is on the upswing. And three weeks ago, the Bureau of Labor Statistics released it's jobless numbers for the fourth quarter, showing a slight decrease in the jobless rate. Of course, some of the decreases are due, in part, to seasonal employment, much of which will terminate in January or February.
As a result, economic analysts are mixed on their forecasts for 2012. The jobless rate may have decreased slightly, and several states saw jobs added (for example, California added 263,200), but unemployement is still very high (using that same example, California has the second highest unemployment rate in the nation, at 11.1 percent). Additionally, it's clear that while some jobs were added last quarter, wages remain the same or lower, making sustainability a real question.
Ultimately, while consumer spending and consumer confidence may be up, the level it is increasing by is not matched by the reality of the U.S. economic climate. The upshot is that, in the last quarter, the amount of borrowing increased, payment defaults decreased, and jobless rates fell. However, during that same time, unemployment rates remained high, wages remained low, and the average American's personal savings fell to 4 percent, a significant drop from the 5.5 percent rate at the start of 2011.
It's clear that Americans are taking on more debt than in previous years, and are paying it off more consistently. However, it is also becoming increasingly clear that this level of consumer spending may be unsustainable, and when it goes away so too will consumer confidence about a recovery.
Tell us: Did you spend more and/or borrow more at the end of last year? Do you feel confident about an economic recovery in 2012?
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