Consumers Earn More, Spend More in March

Personal income and outlays were both up in March; banks continue to meet their doom; and Donald Trump continues his run of spectacle in the spotlight.

By Dees Stribling, Contributing Editor

The U.S. Bureau of Economic Analysis said on Friday that personal income and outlays among Americans were both up in March compared with February. Personal income increased 0.5 percent, and disposable personal income–which is the fun kind of income–increased 0.6 percent, month-over-month. Hand-in-hand with that, personal consumption expenditures increased 0.6 percent. People having some fun with that disposable income, perhaps.

The BEA’s Personal Consumption Expenditure Price Index–a different animal all together, since it’s a gauge of inflation–rose 0.4 percent in March, after the same increase in February. What’s been driving the increases? No surprise here: Excluding food and energy, the PCE Price Index increased only 0.1 percent in March, compared with an increase of 0.2 percent in February.

The extra dollars in consumer pockets, which are apparently not a function of the payroll tax cut enacted late last year, might help account for the uptick in the Reuter’s/University of Michigan’s Consumer Sentiment Index released on Friday. The April index finished at 69.8, compared with 69.6 at mid-month, and 67.5 in March.

Still, consumers are a little grumpy, since the latest reading is near six-month lows. Before the disaster in Japan, the civil war in Libya and the elevator-like rise of gas toward $4 per gallon, the index reached a post-2008 high of 77.5 in February.

Real estate continues to send banks to their doom

Over the weekend the Federal Deposit Insurance Corp. shut down five more U.S. banks, bringing this year’s total so far to 39. Assuming the current rate of closures continues–a fairly large assumption–that would put this year’s total near 120. During all of 2010, the FDIC seized 160 banks, putting them into receivership, forcing a merger with a healthy institution, or shutting them down all together.

The reason for this year’s bank closures is pretty much the same as it was in 2010: the hangover from bum real estate investments of one kind or another in the mid-2000s. Moreover, community banks represent a large share of the failing banks. The names of last weekend’s failing banks alone point to that. Among the five, there was the Community Central Bank (Mount Clemens, Mich.), First Choice Community Bank (Dallas, Ga.) and Cortez Community Bank (Brooksville, Fla.).

More bank failures are on the way. The FDIC’s secret troubled list–secret as to the names on the list, not the existence of the list–currently has about 800 financial institutions on it. Not all of them will fail, but a good number will.

Donald will be Donald

It’s been quite a few days for may-be presidential candidate (as long as publicity is to be milked from the effort) Donald Trump, who entertained an audience late last week in Las Vegas with what’s now being called the “F-Bomb Speech.” Some might remember him, once upon a time, as a part of the CRE profession. As Trump pointed out later, such blue language isn’t all together unusual in the confines of real estate negotiation–or maybe when preparing one’s next bankruptcy, though he didn’t mention that.

In any case, Trump offered his audience some choice quotes on politics and the economy, such as what to do about the trade imbalance with China: “I’m going to say, listen you [expletive, begins with an “m”], here’s a 25 percent levy on Chinese imports…”

At the White House Correspondents Dinner on Saturday, President Obama himself–with Donald Trump in the audience–chimed in on CRE’s most famous head of hair. “I know that he’s taken some flak lately, but no one is happier–no one is prouder–to put this birth certificate matter to rest than The Donald,” the president said. “That’s because he can get back to focusing on the issues that matter. Like did we fake the moon landing? What really happened in Roswell? And where are Biggie and Tupac?”

Wall Street had a modest up day on Friday, with the Dow Jones Industrial Average gaining 47.23 points, or 0.37 percent. The S&P 500 was up 0.23 percent, while the Nasdaq eked out a 0.04 percent advance.