Economy Watch: Sandy Puts Dent in Incomes, Spending; GSEs Report Dropping Delinquencies; Restaurant Owners Less Optimistic

U.S personal income has remained flat and spending decreased 0.2 percent, with the blame attributed to Hurricane Sandy. Both Fannie Mae and Freddie Mac reported that serious single-family delinquencies on loans associated with the GSEs declined in October. And restaurant owners have a pessimistic short-term outlook on sales growth

By Dees Stribling, Contributing Editor

U.S. personal income, which had been edging upward in recent months, stayed essentially flat in October, according to the Bureau of Economic Analysis on Friday. Personal income increased just $400 million, or less than 0.1 percent in October (per capita, that’s just enough to buy every American a $1 cup of coffee at McDonald’s, including tax).

Americans also adjusted their spending downward in October, noted the BEA. Personal consumption expenditures decreased $20.2 billion, or 0.2 percent. Hurricane Sandy probably had a major effect on keeping a lid on income growth, as well as pushing spending down, but the BEA report didn’t quantify the exact effects.

“The storm affected 24 states, with particularly severe damage in New York and New Jersey,” the bureau noted in its report. “BEA cannot quantify the total impact of the storm on personal income and outlays because most of the source data used to estimate these components reflect the effects of the storm and cannot be separately identified.” Still, the bureau figures that work interruptions caused by the storm cost about $18 billion in lost wages.

GSEs Report Dropping Delinquencies

Both Fannie Mae and Freddie Mac reported on Friday that serious single-family delinquencies on loans associated with the GSEs declined in October. According to both companies, “serious” means three monthly payments or more past due.

In the case of Fannie Mae, the serious delinquency rate declined in October to 3.35 percent from 3.41 percent September. The rating is considerably down compared with October 2011, when it was 4 percent, and the current level is the lowest since March 2009, when the trend in delinquencies was very much going upward.

As for Freddie Mac, the serious delinquency rate dropped in October to 3.31 percent, from 3.37 percent in September. Freddie’s current rate is down from 3.54 percent in October 2011, and marks the lowest level since August 2009. Though heading in the right direction, the delinquency rates for the GSEs are still elevated by historical standards; in more “normal” times, the rates rarely top 1 percent in any given month.

Restaurant Owners Less Optimistic

The National Restaurant Association said on Friday that its Restaurant Performance Index–a monthly composite index that tracks the health of the U.S. restaurant industry–stood at 99.5 in October, down 0.9 percent from September. In addition, October represented the first time in 14 months that the index fell below 100, which signifies contraction in the index of key industry indicators.

“Although restaurant operators overall continued to report positive same-store sales in October, their short-term outlook for sales growth and the economy is decidedly more pessimistic,” Hudson Riehle, senior vice president of the research and knowledge group for the association, noted in a statement. “Nearly two out of five restaurant operators expect business conditions to worsen in the next six months, which is double the proportion that expect conditions to improve.”

Wall Street saw a busy trading day on Friday, with a lot of ups and downs, but the indices eventually ended up roughly where they started (perhaps investors haven’t made their minds up about the status of the fiscal cliff negotiations). The Dow Jones Industrial Average edged up a microscopic 3.76 points, or 0.03 percent, while the S&P 500 moved upward even less, 0.02 percent. The Nasdaq lost 0.06 percent.

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