Consumers Open Their Wallets a Little More in April

At the forefront of the increase was a 6.9 percent upsurge in sales at building-material stores, such as DIY giant Home Deport and smaller chains of hardware stores, as consumers not only bought spring-related yard items but also replaced more durable equipment such as lawn mowers and big-ticket barbecue systems.

March 17, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Steve Snodgrass

According to the U.S. Department of Commerce, U.S. retail sales increased 0.4 percent in April. At the forefront of the increase was a 6.9 percent upsurge in sales at building-material stores, such as DIY giant Home Depot and smaller chains of hardware stores, as consumers not only bought spring-related yard items but also replaced more durable equipment such as lawn mowers and big-ticket barbecue systems. Auto sales experienced 0.5 percent increase in April, and consumers were spending more at health-care stores and restaurants too.

But not every retailer got a bounce in April. Clothing store sales dipped 1 percent and department stores lost sales to the tune of 1.5 percent. Electronics stores saw a 0.4 percent decline in sales.

Still, consumers seem to be a little more optimistic these days–or at least they aren’t becoming more pessimistic. The University of Michigan/Reuters reported on Friday that its consumer sentiment index rose from 72.2 to 73.3 between mid-April and mid-May, keeping the index roughly where it’s been for six months now.

Fitch Reports Decline in CRE Loan CDO Delinquencies

Fitch Ratings reported on Friday that commercial real estate loan CDO delinquencies were down in April from 12.8 percent to 12.1 percent. Asset managers, it seems, are slowing selling off the bum loans at a loss.

They’re selling them because there are more buyers now. An increase in distressed loan buyers may be leading asset managers to pursue loan sales over modifications, according to Fitch director Stacey McGovern. “Resolving credit impaired assets at a loss to the CDO has become a consistent trend among asset managers,” said McGovern in a statement. “Further, not all of the credit impaired assets are delinquent at the time of the resolution.”

In Fitch’s analysis, the average modeled losses for these CDOs is approximately 35 percent, while total actual realized losses to-date are only about 5 percent. Thus more losses loom ahead. As real estate fundamentals tend to lag the overall economy, Fitch anticipates an increase in total delinquencies and realized losses over the next few years.

Economy Recovering, But…

“My forecast is that real gross domestic product will grow about 3.5 percent this year,” Charles Evans, president of the Federal Reserve Bank of Chicago, in a speech to the Illinois Wesleyan University Association on Friday. “In fact, we have been hearing many more upbeat business reports, and we recently nudged up our outlook accordingly.”

But there’s still a log of slogging to do, he added. “The ‘for sale’ signs posted in yards, empty storefronts, and long waits for job seekers are powerful reminders of how serious the recession was and how far below our potential we still are… And the 3.5 percent pace of growth I anticipate is quite moderate given the depth of the recession. To offer some perspective, in the first year and a half following the deep 1981 to 1982 recession, growth averaged nearly 8 percent.”

Wall Street isn’t feeling all that optimistic these days, growth or no growth for the economy. The recent volatility took the equity markets downward on Friday, with the Dow Jones Industrial Average dropping 162.79 points, or 1.51 percent. The S&P 500 lost 1.88 percent and the Nasdaq declined 1.98 percent.