There are a limited set of indicators where”off the cliff” is a good thing. Credit card charge-offs areone.
The Federal Reserve recently published their Q2/2011 data on creditcard charge-offs, and while the trajectory is not a surprise, thevelocity is worth noting. I watch the stats for the top 100 banks,and after peaking at 11.05 percent (annualized) in Q2/2010, andafter just four quarters, they now stand at 5.60 percent. Forperspective, the last time we saw a rate this low was Q3 of 2008,the start of the economic meltdown. It has been a remarkablejourney.
We see in our survey data that consumers are experiencing fewernegative actions from their issuers (account closures, linereductions, and pricing increases) which reflect on one hand thatthe worst appears to be behind us. So when will demand pickup?
Consumers don’t appear to be ready to make a bullish move yet (moreon that topic in the weeks to come). And credit card lenders aren’texactly ready to move far beyond prime territory yet (as the FRBdescribes it in their July Senior Loan Officer Survey for July,”Moderate net fractions of banks reportedly eased their lendingstandards on consumer loans over the past threemonths.”-translation: not so much).
It has been ugly. It’s getting better fast. And it’s still tooquiet…