July 2012

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THE LATEST ANALYTICS Income Growth Slows as Consumer Spending Increases Slight expansion in spending among U.S. consumers doesn't meet the Labor Department's expectations. C Department reported recently. Economists had expected onsumer spending grew just 0.3 percent in April, up slightly from 0.2 per- cent in March, the Labor spending to be up 0.3 percent. At the same time, personal income grew 0.2 percent in April, Bureau of Economic Analysis (BEA) said, compared with market expecta- tions of a 0.3 percent gain. Income grew 0.4 percent in March. In dollars, income was up $31.7 billion in April compared to $52.2 billion in March. Spending increased $30.3 billion in April, up slightly from the $29.5 billion increase in March. Disposable personal income— $163.9 billion from $165.8 billion in March. Wages and salaries rose $12.9 billion, or 0.2 percent, in March, BEA said, after increasing $18.4 billion or 0.3 percent, in March and $25.8 billion in February. The March slowdown reflects the weaker labor market. Wage and salary growth ac- essentially after-tax income—rose $22 billion in April with spend- ing exceeding disposable income, while savings dropped $8.3 billion. The report suggested a good start to the second quarter, which began April 1. Consumer spend- ing for the first quarter was up $63.5 billion, according to the recent GDP report—also prepared by BEA—or about $21 billion per month. Consumer spending in total age of disposable (after tax) income slipped to 3.4 percent in April from 3.5 percent in March; it had been 3.4 percent in February. With continuing low interest rates, personal interest payments (non-mortgage interest) dropped 1.2 percent in April to accounts for about 70 percent of GDP and represented more than the entire GDP growth for the first quarter. (Other elements, notably government spending, declined). Personal savings as a percent- counted for 40.7 percent of the growth income in March, down from 39.3 percent in February. "Transfer payments"—various government programs includ- ing Social Security, Medicare, Medicaid, and unemployment insurance—represented about 1.1 percent of the total increase. Unemployment insurance Prices See First Quarterly, Yearly rose $7.7 billion, after falling $16.8 billion in March. Spending on non-durable goods dropped $3.9 billion in April after rising $24 bil- lion in March, suggesting improv- ing consumer confidence to make purchases that require borrowing. The Personal Consumption weighted to services, which ac- counted for 92.4 percent of the total, compared with 61.7 percent in March. Spending on durable goods Expenditure (PCE) Price Index— often considered the Federal Reserve's favored measure of infla- tion—was flat in April and is now 1.8 percent above its year-ago level. payments dropped for the fourth straight month. Part of the reason for the decline in April transfer payments was the calen- dar: April 1 was a Sunday, which meant Social Security payments were made on the previous busi- ness day, March 30, and were counted as March income. The increase in spending was Gain Since 2010 Clear Capital releases index findings that show strong numbers for home pricing around the country. F ing to the May 2012 Home Data Index (HDI) report released by Clear Capital. Quarter-over-quarter, prices or the first time since August 2010, home prices rose on both a quarterly and yearly basis, accord- appreciated 0.4 percent, the first quarterly increase since November 2011. Year-over-year, prices rose by 0.1 percent, according to the index. The increases were attributed to stronger regional growth in the West, Northeast, and South, as well as a rise in REO-only prices. "While gains in national home prices over the quarter and year were minimal in May, there are encouraging trends continuing to play out and gaining momentum beneath the surface," said Dr. Alex Villacorta, director of research and analytics at Clear Capital. "Strength in REO-only price trends as well as some early indications of price gains spreading from low-tier sectors to the mid- and higher- priced homes is helping confirm that the country continues to make progress on its recovery, and we are expecting to see improvements extend over the next several months." Among the four regions, the growth was greatest in the West. Leading all regions with a 2.7 percent price increase, the West also gained 1.9 percent on a yearly basis. According to Clear Capital, the West has shifted from seeing demand for lower-tagged homes priced $140,000 or less, CONTINUED ON PAGE 62 THE M REPORT | 61 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET

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