Friday, February 21, 2020

What Small Business Is Seeing

Small business sentiment is on the rise to kick off 2020, with confidence nearing all-time highs,  according to the CNBC/SurveyMonkey Small Business Confidence Index. The survey reported a sharp turnaround from the lows seen last summer when trade turmoil weighed on Main Street’s outlook.

In the next 12 months, about one-fifth of small business owners expect a negative impact from changes in trade policy, while 26 percent expect a positive effect — more than half say the changes will have no impact. Of the small business owners that said either deal would impact their operations directly, most came from the retail sector.

Generally, business owners are feeling more positive about business, with 56 percent saying conditions are good and only 7 percent saying the opposite. Recession fears have also calmed down somewhat, with 49 percent of businesses saying a recession is likely in the next year, down from 53 percent this same quarter in 2019.

Thursday, February 20, 2020

State of the Air

The Department of Transportation's 2019 Air Travel Consumer Report came out yesterday, reporting that 79 percent of domestic flights last year arrived within 15 minutes of the airline’s schedule — the government’s definition of being on time. That was down slightly from 79.2 percent in 2018.

Hawaiian Airlines took home the prize for being the nation’s most punctual airline for the 16th straight year. Hawaiian scored an 87.7 percent on-time mark, followed by Delta Air Lines at 83.5 percent. After that, from best to worst, it was Alaska Airlines, Southwest, Spirit, Allegiant, American, United, JetBlue and discount carrier Frontier Airlines, last at 73.1 percent.

A total of 302 domestic flights were stuck on the ground for three hours or longer, a 50 percent increase over 2018. Cancellations rose to 1.9 percent, up from 1.7 percent in 2018. Hawaiian had the lowest cancellation rate, while the highest rates belonged to American, Southwest and United.

Wednesday, February 19, 2020

Why Do Americans Save So Much?

U.S. household wealth compared to income is near a record high. Unemployment is near a record low. So why is the personal savings rate still so high? In the fourth quarter, savings as a percent of disposable income was 7.7 percent, more or less the post-Recession average.

Goldman Sachs examined this question, and found that the top 20 percent of Americans by income save 12 percent of their disposable income. Households in the 60th to 80 percentile of income distribution — in 2018, households making between $79,542 and $130,000, according to the Census Bureau — have boosted their savings over the last three years.

The reason? Tightened credit standards led to less borrowing. The Goldman forecast is for the savings rate to fall by 2 percentage points through 2022. If the savings rate reverts back to normal, there should by definition be more spending - which is good news for the U.S. economy.

Tuesday, February 18, 2020

Trouble in Japan

Sobering news from Japan: The world's third-largest economy shrank 1.6 percent in the fourth quarter of 2019  - an annualized percentage drop of 6.3 percent  -  according to a government estimate released yesterday. The decline from the third quarter is the country's biggest contraction since 2014.

Japan absorbed a difficult sales tax hike and grappled with the aftermath of Typhoon Hagibis, a powerful storm that hit the country last fall. The spread of the coronavirus now threatens to stamp out hopes for a recovery in the first quarter.

Analysts say that tourism to Japan, particularly visitors from China, could be hard-hit if the virus is widespread there. New government figures also showed household spending deteriorating, suggesting that the economy already contracted more than first thought at the end of last year.

Friday, February 14, 2020

Record Retirement Savings

Average 401(k) and IRA balances have hit record levels, according to a new study out from Fidelity. The average 401(k) balance rose to $112,300 last year, a 7 percent increase from last quarter’s balance of $105,200. The average IRA balance was a new high of $115,400.

It’s not just because the markets are up — employees are saving more. One-third of plan participants increased the amount they were saving by an average of 3 percent. And a record 35 percent of employers automatically enrolled new workers in their 401(k) plan.

The study also found a record 441,000 IRA or 401(k) accounts Fidelity manages had balances of $1 million. Still, 401(k) and IRA millionaires are relatively rare: The number of retirement millionaires represents 1.6 percent of the 27.2 million IRA and 401(k) accounts managed by Fidelity.

Thursday, February 13, 2020

The Coronavirus and Oil Prices

One possible side effect from the coronavirus seeming to come under control: oil prices are rising. Oil prices rose over 3 percent yesterday as China reported its lowest daily number of new coronavirus cases since late January. That stoked hopes that fuel demand in the world’s second-largest oil-consuming economy may begin to recover.

Brent futures, the international benchmark, gained $1.78, to $55.79 per barrel yesterday, while U.S. West Texas Intermediate crude gained $1.23 to $51.17. Those were the highest settles for both futures since January.

The demand concerns from the outbreak had pushed Brent and WTI to their lowest level in 13 months on Monday. at that point, both benchmarks are down more than 20 percent from the highs they had reached in January.

Wednesday, February 12, 2020

The State of America's Debt

Household debt surged in 2019, marking the biggest annual increase since just before the financial crisis, the New York Federal Reserve reported yesterday. Total household debt balances rose by $601 billion last year, topping $14 trillion for the first time. The last time the growth was that large was 2007, when household debt rose by just over $1 trillion.

The growth was driven mainly by a large increase in mortgage debt balances, which rose $433 billion. That was the largest gain for that figure since 2007. Housing debt now accounts for $9.95 billion of the total balance.

Balances for auto loans and credit cards both increased by $57 billion for the year. Credit cards have surpassed student loans as the most common form of first credit among young borrowers, after several years when student loans were higher.