I am reading an interesting report from ORCC on Payment Delinquencies Spanning All Industries from December 2007. Here are a couple of charts:

Consumers Are Overextended

Households across the country are finding it harder to meet financial obligations now than they did just twelve months ago. Of the households surveyed, 43 percent report that it is harder for them to meet their financial obligations, including bills, loans, mortgage and debt, than it was 12 months ago.

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Reasons It Is Harder To Meet Obligations vs. 12 Months Ago

More than half of households chose multiple reasons why they are finding it harder to meet their financial obligations. The most popular reason—and the only one cited by more than half of respondents—is increased energy costs. As further evidence that troubles are not limited just to the mortgage industry, only 19 percent of households report that their mortgage is a reason why it is harder for them to meet financial obligations.

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This is one of those times when I sit back and wonder about the small sample size and methodology.

Two separate online surveys were conducted to understand consumer and biller collections. The consumer household survey was conducted in conjunction with MarketTools, Inc. Survey responses were collected from October 5, 2007 until October 25, 2007. Survey respondents were recruited and invited to participate by MarketTools, Inc. Survey invitations were sent via email with a link to a website containing the survey questions. To encourage participation, MarketTools, Inc. offered respondents 50 bonus points they could redeem for prizes. Responses were received from a nationally representative sample of 1,006 online households.

Questions About The Survey

  • Is that sample size valid?
  • Did “bonus point” skew the results?
  • If you have to pay people to take a survey what kind of respondents are you going to get?
  • Do consumers simply not want to admit their house is their problem?
  • Is the psychological impact of seeing gas prices tick up and up and up a constant irritation?

I do not know about the sample size but I think the winner is number 5.

Weekly US Gasoline Prices

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Chart courtesy of the Department of Energy.

Note that the survey was taken in October. A quick glance at the above chart shows huge gasoline price dips in previous years but not 2007. In addition, some 30% of the population does not own a home so mortgage related problems do not apply.

Given that Homeowners Protest Property Taxes one might have expected to see that reason on the list except perhaps it is typically only paid twice a year for some and lumped in with mortgage payments for others. And what about food prices?

The key number is the dramatic 43% rise in those finding it harder to make payments for whatever reason. Looking at that number, it should not be shocking to see Credit Card Defaults move to Forefront of Deflation Debate. If unemployment shoots up in 2008 as expected, things are going to get very ugly.

Mike “Mish” Shedlock
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