How can we be having an economic recovery when debit card usage is plunging and pending home sales are declining during the biggest home selling season? The answer is that we aren’t having an economic recovery. The consumer is dead in the water. They aren’t using their debit cards because there is no more cash left in the checking account to debit. As a last gasp, they are again turning to their credit cards to make ends meet. One little problem. That just delays the time when they have to pay. And if the cash isn’t in the checking account today, it won’t be there next month either. Do you think the Wall Street banks will be able to reduce their loan loss reserves in the next year? Not bloody likely. There is a tsunami of bad debt building up again. Millions have fallen off the 99 week UC rolls. There is nothing left to pay the bills and there is nothing coming down the pike from the Obamanistas to save the day.
The data today from Visa is a sign of desperation and coming consumer collapse. Retailers will be crushed. Mall owners will be crushed. The banks that loaned the money to the mall owners will be crushed. Delusions and illusions will be crushed.
Pending home sales should be going up as people sell their houses in the summer in order to get their kids set up for the coming school year. The NAR said they would rise this month. Instead they fell. And last month’s number was revised downward. We’ve got the lowest mortgage rates in history and pending home sales are falling. That sure sounds like a healthy housing market.
The data tells a story – a story with an unhappy ending. We are in recession today. Hussman is right. ECRI is right. The data proves it. Only dumbasses and pathological liars say otherwise.
Visa offered some disappointing data on payment trends this morning in a new 8-K filed with the SEC.
The key takeaway: debit transactions collapsed as consumers shifted to credit.
From the release (emphasis added):
For the month of April 2012, U.S. aggregate payments volume growth was negative 3% versus U.S. aggregate payments volume for the prior year period. Further broken down, U.S. credit payments volume growth was positive 8% and debit payments volume growth was negative 12%. Cross border volume growth on a constant dollar basis was positive 13% globally over the prior year period. Processed transactions growth was negative 1% globally.
Through May 28, 2012, U.S. aggregate payments volume growth was 0% versus U.S. aggregate payments volume for the prior year period. Further broken down, U.S. credit payments volume growth was positive 10% and debit payments volume growth was negative 8%. Cross border volume growth on a constant dollar basis was positive 13% globally over the prior year period. Processed transactions growth was positive 1% globally.
Visa shares were nearly two percent lower in pre-market trading.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, declined 5.5 percent to 95.5 from a downwardly revised 101.1 in March but is 14.4 percent above April 2011 when it was 83.5. The data reflects contracts but not closings.