US recession loosing its grip

Evidence is mounting that the longest recession to grip the United States since World War II is losing its grip. The latest hint is due Friday when the US government releases data on consumer spending and income for July.

Importantly, personal spending is expected to have posted a modest gain last month, driven higher by the popular Cash for Clunkers program. Economists surveyed by Thomson Reuters expect personal spending rose 0.2 percent in July after a 0.4 percent gain in June. Economists believe that personal incomes, the fuel for future spending increases, probably rose 0.2 percent as well, following a 1.3 percent decline in June.

(source: Associated Press)

US consumers optimistic

Sentiment among US consumers rose more than expected in August and expectations hit the highest level since the recession began, indications that Americans' pessimism about the economy may be lifting. The housing sector also showed signs of life as a national measure of home prices posted its first quarterly increase in three years.

However, at 54.1 the Consumer Sentiment Index is still well below 90, the minimum level associated with a healthy economy. Anything above 100 signals strong growth. Economic commentators closely monitor confidence because consumer spending accounts for about 70 per cent of all US economic activity. Consumer sentiment - fuelled by signs the economy is stabilising - has recovered somewhat since hitting a record-low of 25.3 in February earlier this year.

Many analysts expect the economy to grow 2-3 per cent in the current July-September quarter, spurred by a more stable housing market and the Cash for Clunkers program, which has boosted auto sales.

(source: Sydney Morning Herald, 25 August 2009)

GFC claims life cover

More than 65 per cent of consumers consider affordability to be a key reason for cancelling a life insurance policy, according to a recent independent study commissioned by ING. Australians are increasingly stating the Global Financial Crisis as a reason to cancel a life insurance policy as they struggle with the prospect of recession, unemployment, stock market declines and other bad financial news.

(source: Money Management)

Housing affordability takes a tumble

Housing affordability dropped more than 5 per cent in the June quarter on the back of rising house prices, the Housing Industry Association-Commonwealth Bank First Housing Affordability Index has found.

The Index, released yesterday, slid to 152.5 index points in the June quarter from 161 index points during the March quarter.

The median house price rose to $419,900 for the quarter, from $386,400 in the March quarter, taking the median monthly mortgage repayment payment to $1,983 – up from $1,843.

Housing Industry Association chief economist, Dr Harley Dale said that while affordability had taken a tumble, it was still well ahead of the corresponding period last year thanks to a sharp recovery in house prices from mid 2008.

(source: Mortgage Business)

Low interest rates fuel refinancing boom

New data has showed a record number of Australian consumers are refinancing their home loans to take advantage of the current low interest rates. Housing finance figures from the Australian Bureau of Statistics revealed borrowers refinanced a total of $1.5 billion in June - a whopping 94.7% jump from a year ago.

Mortgages taken to buy a block of land climbed by 48.4% while loans to build new homes fell by 6.9% dragged down by lower investment loans. (see previous post)

"Home loan customers are refinancing at a record rate and in the process, unleashing fresh spending power," said Craig James, chief economist with Commonwealth Bank's CommSec. "The reduction in work hours in the community is clearly not a restraint on consumer spending. Consumers have been actively unlocking spending power by refinancing loans at super-low rates. The benefits of the cheaper debt are long-lasting, erasing fears of a slowdown in consumer spending later in the year."

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(source: Your Mortgage, 14 August 2009)