Moody's, Equifax Project Rebounding Consumer Environment

Depending on how much you trust the brains behind Equifax and Moody’s, great things could be in store for the consumer economy continuing into 2012.

CreditForecast.com, a joint venture between Equifax and Moody’s Analytics “projects a rebounding consumer environment along with recovering home and auto markets in 2012.”

Equifax Chief Economist Amy Crews Cutts gives some color to the good consumer news: “After spending recent years in the financial doldrums, U.S. consumers are poised to make a comeback in 2012.”

Some highlights from the report:

Consumer Lending:
Households are increasingly reducing their debt, as consumer balances are down $187.8 billion from early 2009 totals. Credit more appropriately matches consumer wealth and income levels today. Increased solicitations for credit cards are being seen, accompanied by a 41 percent increase credit card inquiries since the recession low.

In 2011, the number of new bank credit card accounts hit 10 million for the first time since 2008, and the upward trend is expected to continue into 2012. Consumer optimism may be the cause of these increases as spending continues to maintain healthy increases. Retail sales were up 7.7 percent in 2011, the strongest showing since 1999.

Student Lending:
Student lending is rapidly increasing, reflecting the impact of a poor job market that may be causing more students to stay in college and others to return to gain new skills. As the student loan debt has risen in stride with the declining labor market, delinquency rates have been steadily increasing, resulting in a high volume of accounts that are two or more payments past due or in collections. Heading into 2012, however, unemployment is expected to drop further, which may slow the growth of this lending sector over the course of the year.

Auto Lending
Increasing auto sales are driving an increasing demand for auto financing. Growth in auto bank and auto finance originations continue to trend upward nationally, with auto loan inquiries up 27%, which demonstrates continued positive momentum.

Mortgage Lending
Outstanding balances of home mortgages (including first liens and home equity lines and loans) declined by $1 trillion (10.4%) since 2008 and continue to drop. Mortgage rates are at all-time lows, and refinance shares are high but mortgage originations are not responding to low rates. Tighter lending guidelines are reflected in loans made to the prime risk segment,* which now comprise more than 80% of all new mortgage originations.

*Equifax risk scores of 700 or higher