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Sunday, April 16, 2017

Wolf Richter Points Out Two Warning Signs for the U.S. Economy

...in separate SEEKING ALPHA posts.

Consumers' appetite for eating out seems to have been curbed of late, claims Richter in Restaurants In Worst Tailspin Since 2009/2010.

Some excerpts:
Foot traffic at chain restaurants in March dropped 3.4% from a year ago. Menu prices couldn't be increased enough to make up for it, and same-store sales fell 1.1%. The least bad region was the Western US, where sales inched up 1.2% year over year and traffic fell only 1.7%, according to TDn2K's Restaurant Industry Snapshot. The worst was the NY-NJ Region, where sales plunged 4.6% and foot traffic 6.3%.
This comes after a dismal February, when foot traffic had dropped 5% year over year and same-store sales 3.7%. The February debacle was blamed on $65 billion in delayed tax refunds from the IRS, as mandated by Congress, to allow the IRS to get its arms around a large-scale identity-theft problem. But by mid-February, the floodgates opened and record amounts of tax refunds started pouring out. By the end of February, the IRS was pretty much caught up. So March, with all this money sloshing around in bank accounts, was expected to be better. But no.
In his post Great Debt Unwind: Consumer Bankruptcies Jump, First since 2010. Commercial Bankruptcies Spike Wolf observes that business backruptcies are on the rise.

Some excerpts:



Commercial bankruptcy filings, from corporations to sole proprietorships, spiked 28% in March from February, the largest month-to-month move in the data series of the American Bankruptcy Institute going back to 2012. They’re up 8% year-over-year. Over the past 24 months, they soared 37%! At 3,658, they’re at the highest level for any March since 2013.
Commercial bankruptcy filings skyrocketed during the Financial Crisis and peaked in March 2010 at 9,004. Then they fell sharply until they reached their low point in October 2015. November 2015 was the turning point, when for the first time since March 2010, commercial bankruptcy filings rose year-over-year.
Are consumers immune from debt problems?


Apparently not, according to Richter:

Now come the consumers – not all consumers, but those with mounting piles of debt and stagnating or declining real incomes, of which there are many. They’d been hanging on by their teeth, with bankruptcy filings consistently declining since 2010. But that ended in November 2016.
In December, bankruptcy filings rose 4.5% from a year earlier. In January they rose 5.4%. It was the first time consumer bankruptcies rose back-to-back since 2010. I called it “a red flag that’ll be highlighted only afterwards as a turning point.”
In March, consumer bankruptcy filings rose 4% year-over-year, to 77,900, the highest since March 2015, when 79,000 filings occurred, according to the American Bankruptcy Institute data.  The turning point has now been confirmed.
To sum up...
Total US bankruptcy filings by consumers and businesses in March spiked 40% from February and rose 4% year-over-year to 81,590, the highest since March 2015...

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