Garnet Capital Advisors Blog

Although retail sales dipped in February, the U.S. economy and related measures are all looking very good. Gross domestic product (GDP) looks to come in above trend at 2.6% for 2018 and the U.S. Federal Reserve expects it to continue strong at 2.4% in 2019. Unemployment stands at its lowest rate in 17 years. Fed believes it could fall even lower, to 3.5%, next year. Consumer sentiment is the highest its been in 14 years, and interest rates are rising.

The U.S. economy and related measures are in an upward trend. Incomes are rising more than spending. Gross domestic product (GDP) looks to come in above trend at 2.6% for 2018 and the U.S. Federal Reserve expects it to continue strong at 2.4% in 2019. Unemployment stands at its lowest rate in 17 years and the Fed believes it could fall even lower, to 3.5%, next year. These are all positive signs for loan generation and performance.

The U.S. economy is in an uptrend.

The only thing not on the rise in a recent spate of economic reports was retail sales, which dipped across the U.S. But these were not significant and according to MarketWatch, likely a sign that Americans were retrenching after a big holiday season. 

They may gear up again in spring. Taxes will have been paid and tax refunds will start arriving. 

Spending may in fact boom. In March, consumer sentiment exceeded expectations by leaping to the highest level in 14 years. The sentiment spike was split somewhat by income. Households in the lowest third of incomes across the nation had a higher sentiment than the average, indicating that they are even more optimistic about the economic future than the general population. But households in the highest third had lower consumer sentiment, by more than 7 points.

The economic outlook is robust enough that Philadelphia Fed President Patrick Harker indicated that the Fed might hike interest rates 3 times in 2018, versus the 2 times indicated earlier this year. 

The outlook for loan generation is also very bright.

Outlook for Loan Generation and Performance Positive

This scenario is ideal for banks. Rising consumer confidence often presages rising consumer spending, especially given a robust economy and excellent economic picture. 

Consumers planning to spend are in the market for credit cards and personal loans. People who feel their incomes are rising start looking for new homes, cars, and more goods and services. Loan originations will rise in their wake.

The confidence registered by lower income brackets is a sign that they will be willing to purchase new homes, cars, and goods as well. Steady employment and a strong economic outlook mean that the consumers will be able to make monthly payments, so the loans are not at risk of underperformance..

Climbing interest rates will increase banks’ margins and performance.

Seek the Advice of a Seasoned Loan Sale Advisor

Now is a good time to review and adjust your loan portfolio. There’s no better time to seek loan sales or rebalancing than a booming economy. For more information, sign up for our newsletter.