According to the Federal Reserve, economic conditions are weakening across much of the nation at the same time that food, fuel and raw material prices are increasing.
“In particular, price increases were consistently reported for food products, fuel and energy products, and many raw materials,” says the central bank.
The Fed notes that spending at retailers was softening across the country. New car sales are flat or declining in most districts. Overall, economic growth has slowed in nine of the Fed’s 12 districts since February.
“What this report says is that the recession really hasn’t begun to roll yet,” said former Fed governor Lyle Gramley. Gramley, who is now a senior economic adviser at the Stanford Group in Washington, also said, “This is an economy that is started over the edge, but it is not plunging at this point.”
American Bankers Association’s (ABA) Consumer Credit Delinquency Bulletin reports that fourth quarter (’07) delinquent consumer credit reached its highest level since 1992. The composite ratio, which tracks eight closed-end installment loan categories, rose to 2.65 percent of all accounts in the fourth quarter.
The ABA study covers more than 300 banks that hold a majority of outstanding consumer loans in direct/indirect auto, home equity, home improvement, marine, mobile home, personal and recreational vehicle loans. Losses tied to mortgages, credit cards and other consumer loans are expected to hurt quarterly results at the larger lenders as well as the more specialized lenders.
“People overextended themselves. They took out loans they thought weren’t a problem as long as house prices kept rising,” said Nigel Gault, director of U.S. research at Global Insight.
The Fed’s report (known as the “Beige Book”) notes the following: “Labor markets were mostly described as weakening since the last report, though a few Districts reported ongoing shortages of skilled workers and some districts noted wage pressures.”