Jul 05, 2013 Philip Burgess
As the U.S. economy begins to pick up steam, consumers are likely to feel comfortable enough to spend more money.
Typically, heightened spending levels lead to borrowing, so short term lenders might want to prepare for an influx of applications in the coming months.
Consumer confidence rises markedly in June
Confidence levels hit a five-year high in June, as The Conference Board Consumer Confidence Index increased to 81.4, up from 74.3 in May. Americans felt better about their current and future prospects as well, with solid gains in both the Present Situation Index and Expectations Index.
This improvement was better than economists' expectations, as 77 experts surveyed by Bloomberg called for a reading of 75.1. Projections ranged from 72 to 79.5.
"Consumers are considerably more positive about current business and labor market conditions than they were at the beginning of the year," said Lynn Franco, director of economic indicators at The Conference Board. "Expectations have also improved considerably over the past several months, suggesting that the pace of growth is unlikely to slow in the short term, and may even moderately pick up."
Jim O'Sullivan, chief U.S. economist at High Frequency Economics, told Bloomberg that the economy has shown signs of strength even with the fiscal drag. Three of the biggest factors in the economy's improvement have been rising property values and stock prices as well as employment gains.
U.S. home values rise more than expected in April
It appears as though consumers have more reason to feel confident in the economy, as home prices increase by the most in more than seven years during April.
The 10-city composite posted an 11.6 percent year-over-year gain in April, while the 20-city composite was up 12.1 percent in the same period, according to the Standard & Poor's/Case-Shiller Home Price Indices. Both composites also posted month-to-month gains.
"The 10- and 20-City Composites posted their highest monthly gains in the history of S&P/Case-Shiller Home Price Indices," said David Blitzer, chairman of the index committee at S&P Dow Jones Indices. "Thirteen cities posted monthly increases of over two percentage points, with San Francisco leading at 4.9 percent."
All 20 cities showed positive annual gains, with San Francisco leading the way at 23.9 percent, followed closely by Las Vegas, Phoenix and Atlanta.
Brian Jones, senior U.S. economist at Societe Generale, told Bloomberg that the housing market's recovery, specifically rising home prices, have been a major factor in increasing consumer confidence and economic growth. Employment gains and higher stock prices have contributed as well.
Short term lenders should prepare for increased demand as economy improves
With many aspects of the economy showing improvement in the past couple months (i.e. consumer confidence and home prices) short term lenders are likely to see more applications for financing as consumer spending picks up.
With that said, these financial institutions should prepare their staff to be ready for heightened demand so there is no hold up if consumers flood them with requests for short term lending.