Consumer Comeback Blog

How Do Your Personal Finances Fit into Economic Outlook

From home prices to consumer confidence, the monthly economic indicators were released today. These indicators help consumers gauge the economic environment and how their personal finances and the overall strength of their credit score fit into the big picture.

The Chicago Purchasing Managers Index (PMI)
measures acquisition of goods and service and gives an peek into the the health of the economy. The Wall Street Journal’s Marketwatch reported that in July, the Chicago PMI exceeded economists’ previous projections and rose to 53.7% in July from 52.9% in June, representing the first increase in three months. Any reading above 50% indicates growth. The order backlog index jumped 10.6 points to 52.8%, but production fell 2.5 points to 54.5% and employment skidded 7.1 points to 53.3%.

The S&P/Case-Shiller Home Price Indices, which measures U.S. home prices, showed that average home prices increased by 2.2% in May over April for the nation’s 20 largest cities. This improvement reflects the second month of increasing home prices across the nation. April to May also showed the percentage increase in more than 10 years. All 20 cities and both Composites posted positive monthly returns. No cities posted new lows in May 2012.

The Conference Board Consumer Confidence Index showed slight improvement in July, increasing from 62.7 in June to 65.9 this month. Consumer were slightly less optimistic about business conditions this month, with those claiming business conditions are “good” dropped from 14.2% to 13.8%. On the other hand, consumers were less likely to brand conditions as bad, easing up from 35.9% in June to 34.2% in July. As for the job market, fewer consumers complained about that jobs are “hard to find” dropping from 41.2% in June to 40.8% in 40.8 in July.

“Despite this month’s improvement in confidence, the overall Index remains at historically low levels,” Lynn Franco, Director of Economic Indicators at The Conference Board said in a press release. “Consumers’ attitude regarding current conditions was little changed in July, but their short-term expectations, which had declined last month, bounced back. However, while consumers expressed greater optimism about short-term business and employment prospects, they have grown more pessimistic about their earnings. Given the current economic environment — in particular the weak labor market — consumer confidence is not likely to gain any significant momentum in the coming months.”

July brought good news from the Bureau of Economic Analysis in regards to consumers’ wallets. Personal income increased $61.8 billion, or 0.5%, and disposable personal income (DPI) increased $52.4 billion, or 0.4% in June, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $1.3 billion, or less than 0.1%. In May, personal income increased $39.0 billion, or 0.3%, DPI increased $31.7 billion, or 0.3%, and PCE decreased $13.3 billion, or 0.1%, based on revised estimates. Real disposable income increased 0.3% in June, compared with an increase of 0.5 percent in May. Real PCE decreased 0.1%, in contrast to an increase of 0.1%.

According to the Bureau of Labor Statistics ,consumers have seen modest growth in compensation. Compensation costs for civilian workers increased 0.5%, seasonally adjusted, for the 3-month period ending June 2012. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.4%, and benefits (which make up the remaining 30% of compensation) increased 0.6%. Compensation costs for private industry workers increased 1.8 percent over the year. In June 2011 the increase was 2.3%. Wages and salaries increased 1.8 percent for the current 12-month period.