Drops in sales tax collections, commercial bank lending activity cause for concern?

Local angle first: today, New York Comptroller Thomas DiNapoli reported that sales tax collections grew at a slower rate on average in 2011 than in 2010, saying that continued caution with respect to the economy is the flavor of the day. In Westchester County, sales tax collections increased just 2% in 2011, marking a sharp contrast compared to 2010, when local sales tax collections increased 6.4%.

Big picture: according to Beata Caranci, Vice President and Deputy Chief Economist for TD Bank, consumer credit, which largely drives consumer spending (and which in turn largely drives economic output) dropped off in the second half of January, signifying the economy may not be as strong as some are perceiving it to be.

Caranci: “…The largest provider of consumer credit is commercial banks. They account for just over half of all private sector credit disbursement. Unfortunately, the weekly tracking of this credit is showing a reversal of fortunes since the economy-wide monthly data was released two weeks ago. Not only did commercial bank lending activity come to an abrupt halt in January, but it practically fell off a cliff…

“Simply put, for those expecting a strong rebound in consumer spending in the first half of the year based on December’s rebound in credit demand and the recent new job hiring activity, think again.”

 

Happy Monday Morning! Report – the Week Ahead:

> In the, “We have to get this news item out of the way” category:

  • METRO NORTH WILL RESUME SERVICE AT 2PM, WILL RUN ON A SUNDAY SCHEDULE.
  • Over 100,000 Con-Edison customers without power; company expects power to be restored by Thurs. Sept. 1 at the latest.
  • Reports indicate Sound Shore, Saw Mill River area hardest-hit in Westchester County.
  • Early estimates put Irene damage at $7 billion, according to the New York Times, with insurance companies being hit with an estimated $2.6 billion in costs.
  • The A.M. Best Co. has estimated disaster-related losses from 2011 at $27 billion through June 30 (so figure much higher when you include damage incurred since), making this year one of the costliest in recent history.

> Consumer spending in the U.S. increased by 0.8% in July (after falling by 0.1 percent in June), markingĀ a major turn-around and a positive sign for the economy. Economists had expected gains of 0.5%.

> Personal income data, housing index and manufacturing index due out this week – stay tuned.

> In the coming weeks, the Business Journal will be closely following Gov. Cuomo’s Regional Economic Development councils and the newly-launched “NY Open for Business” campaign; check back here for more analysis as those stories develop.