Steps to Grow Your Business
April 11, 2017
Why Responsive Web Design is Important for Your Home Improvement Business
June 26, 2017

Economic Update

GDP Growth in Q1 Was a Disappoint but Q2 Appears Better…

The last time we provided an economic update, in April, GDP growth in the first quarter of 2017 appeared to have slowed compared to second half of 2016.  The numbers are now out and GDP did slow in Q1 to 1.2% compared to 2.1% in Q4 of 2016.  Slower growth in the first quarter was attributed to slower consumer spending and a decline in inventory accumulation by businesses.  Consumer spending in Q1 was estimated to have grown only 0.6% compared to Q1 of 2016 which is indeed a negative trend for those tied to the home improvement and remodeling business.  The good news is that GDP growth in Q2 appears to be rebounding as the latest GDPNow forecast from the Atlanta Fed is 2.9%.  It is interesting to note that as recently as the end of May, this forecast was estimated at 4.0% but has come down the first three weeks of June based on data released to this point.

…Job Growth Remains Good and the Unemployment Rate Keeps Dropping…  

For the month of April the Labor Department reported that the economy added 211,000 and the unemployment rate dipped to 4.4%, an improvement from 98,000 jobs added and a 4.5% unemployment rate in March.   In May, 138,000 jobs were added and the unemployment rate hit 4.3%, the lowest it has been since May 2001.

…the Fed Raises Rates Again…

On June 14th the Fed raised rates once again by 0.25% to a range of 1.00% to 1.25%.  This is the second increase this year and third in the past six months.  As a result, expect that rates consumers pay for a variety of loans including mortgages, autos, credit cards and other types of consumer credit will continue to rise this year.

…Loan Performance Continues to be Good Overall but Warning Signs on the Horizon for Home Improvement Financing?

Overall consumer credit performance remains good.  The S&P/Experian Consumer Credit Default Composite Index was 0.86% as of the end of May down slightly from 0.89% at the end of December 2016 and up slightly from 0.81% as of May 2016.  While the Index was up slightly from May of last year it does remain near 10 year lows.  Within the index, however, there has been a steady increase in bank credit card defaults since the end of last year while auto defaults have declined.  The increase in bank credit card defaults over the last several months may have had, or will have, some impact on financing in the home improvement industry particularly for subprime credit customers.