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February 5, 2010

  • U.S. Spending and Unemployment Outlook, Pt.1
      A shift in philosophy.

    Americans had enough of the abusive practices of credit card companies over the past few years and decided to take matters into their own hands. Consumers realized it was time to learn to live within their means without depending on credit cards to meet the daily needs of their families. The nation has seen a significant reduction in consumer spending over the past year sending a strong message to lenders. Lenders continue to be cautious about who they are extending credit to, however, must find other means to produce lost earnings from credit card interest income. Gary Thayer, Wells Fargo Advisors LLC in St. Louis, says that while consumers continue to reduce their debt, banks must continue to be cautious in wake of record breaking write-off's that continue to plague the industry.

    Moody's Investors Service recently reported that credit card delinquencies of 30 days or more declined slightly in December. Furthermore, most of the nation's top credit card issuers reported early card delinquencies were down in December as well. Kenneth Chenault, Chief Executive Officer (CEO) for American Express, said that the company is in “stronger shape” than it was a year ago. American Express has been the top performer throughout the recession and is unique in that the company processes card transactions as well issues cards. Still, Chenault believes the company still has some challenges to face over the next year as the nation continues to deal with high unemployment and a broken housing market.

    Although U.S. consumer credit card spending has experienced the longest downward trend since record keeping began, consumer spending declined less than expected during December. Experts attribute the slow down as a result of new automobile loans in response to government incentives. Consumer spending makes up approximately 70 percent of the economic growth and spending is expected to decline during 2010 as Americans continue to be concerned about the rising unemployment and cost of living.

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