Let's look at the data that came out this week on the delinquency rates of various types of consumer debt. The delinquency rate on auto loans is 3.8%, up from 2.9% 2 years ago. Consumer finance? Up to a very high 8.3%. Credit card delinquencies are 4.8%, rising from 4%. Is it any wonder credit card companies are cutting credit lines and raising interest rates to try to stem the bleeding?

Mortgage delinquencies have doubled from 2.5% to 5%. Consumer credit in general is up to 5% delinquent, more than two-thirds higher than 2 years ago. This is all illustrative of a consumer in trouble.

This chart, from John Burn Real Estate Consulting, surveys hundreds of homebuilders nationwide. New home sales forecasts are at all-time lows. Traffic of potential buyers looking at new homes is dismal.


Click to enlarge.

Housing permits have fallen to a 26-year low, around 786,000. But that statistic can be misleading. Back in 1982, the US population was 230 million. Today, it's 305 million. We're roughly one-third larger. If you adjust for population, the number would be in the 600,000 range, which is far worse than a mere 26-year low. Those permits mean jobs, and permits need to rise with the population in order to maintain the job base.

Since we're looking at today's data, the Michigan consumer sentiment number simply fell off a cliff, plunging to 57 from over 70 last month, and an average of 85 last year. It was only a few years ago that the number was over 100. The last time it was this low, we were in the midst of 1982's very serious recession.

This next chart, from Dismal.com, shows the fall-off in mortgage applications, which are down over 30% since the end of 2007.


Click to enlarge.

Let's pay particular attention to the fall-off in applications for re-financing, which is down by almost 60%. This was the source of mortgage equity withdrawals, which fueled consumer-spending growth even in the face of the last recession.

Let's look at a graph I used 2 years ago, from work done by James Kennedy and Alan Greenspan, on the effect of mortgage equity withdrawals (MEWs) on the growth of the US economy.


Click to enlarge.

In both 2001 and 2002, the US economy continued to grow on an annual basis (the "technical" recession lasted just a few quarters). The graph suggests that this growth was entirely due to MEWs. In fact, MEWs contributed over 3% to GDP growth in 2004 and 2005, and 2% in 2006.

Without US homeowners using their homes as an ATM, the economy would have been very sluggish indeed, averaging much less than 1% for 6 years of the Bush presidency.