The Most Bullish Trend In The Economy Right Now

There’s plenty of dismal economic news out there.

There aren’t enough jobs, for one thing. And today’s Empire Fed report screams recession.

But we’d be remiss to ignore the positive signs out there as well.

A big one is on the credit/lending/deleveraging front.

A new Fed report on US credit conditions shows that the pace of deleveraging has rapidly slowed.


Says the report:

Aggregate consumer debt held essentially steady in the first quarter, ending a string of nine consecutive declining quarters. As of March 31, 2011, total consumer indebtedness was $11.5 trillion, a reduction of $1.03 trillion (8.2%) from its peak level at the close of 2008Q3, and $33 billion (0.3%) above its December 31, 2010 level.  Behind the levelling off of total consumer debt was a small increase in mortgage balances shown on consumer credit reports. In spite of the small increase, household mortgage indebtedness and home equity lines of credit (HELOCs) are now 8.1% and 9.9%, respectively, below their peaks. Consumer indebtedness excluding mortgage and HELOC balances fell slightly ($30 billion or about 1%) in the quarter.  Consumers non-real estate indebtedness now stands at $2.29 trillion, 9.6% below its 2008Q4 peak.

Now you can argue that US households are still in too much debt, but from a current economic indicators standpoint, ending a streak of nine-consecutive declining quarters is significant.

This of course jibes with the recent look at revolving credit (credit cards, basically), which shows that credit card usage may have finally turned the corner.


And finally, the latest Fed Senior Loan Officers survey shows loosening credit standards across the board.

Here’s a representative chart showing less and less tightening of standards for commercial and industrial loans.


So that’s the first bullish trend.

The other half-bullish trend is in housing/construction.

As noted last weekend, for the first time in five years, the economy is adding construction jobs.

Housing starts appear to have found a floor.


Even on home prices, some measures show signs of stabilisation. While those waiting for a housing rebound have been disappointed for a long time, the prospect of one, even if faint, would be a huge boost for the economy.