Sep 24, 2013 Philip Burgess
Short term lenders might want to prepare for increased demand in the fourth quarter, as consumer spending is expected to jump in the final three months of the year.
Fannie Mae's Economic & Strategic Research Group recently reported that the waning fiscal drag, coupled with increasing household wealth, could lead to higher spending levels in the coming months. There is concern that overall growth could slow, but consumers are going to be a bright spot.
"On the bright side, consumer spending appears to be improving from the tepid pace seen at the beginning of this quarter," said Doug Duncan, chief economist at Fannie Mae. "Although Americans may continue to exercise caution, real consumer spending growth should improve modestly to slightly over 2 percent in the current quarter."
In addition to a stronger labor market and surging home values, Americans may be feeling more confident due to the burgeoning stock market. According to USA Today, the Standard & Poor's 500 and Dow industrials both reached all-time highs at closing on September 18.
As consumer spending picks up, short term lending demand could follow suit. People may think that financial troubles aren't on the horizon when conditions are favorable, but that isn't always the case. In fact, unexpected expenses may be more detrimental when consumers are spending money.
For example, after a new car purchase, people might be short on cash. So, if a pipe burst in their home in the weeks following this buy, the budget may be stretched too far. As a result, bills may go unpaid, potentially leading to late fees and penalties. However, short term lending can provide people with the money to prevent such a situation.