“Deja vu it ain’t.
The U.S. looks unlikely to suffer the same sort of swoon this year as the one in 2011: Household, bank and company balance sheets are stronger, and the shocks hitting the economy so far are weaker, with gasoline prices even showing signs of slipping after an early-year rise.
Consumer-loan delinquencies fell across the board in the fourth quarter, the first time that’s happened in eight years, according to the American Bankers Association in Washington. Banks have reduced leverage, with financial-institution debt as share of the economy at its lowest level in a decade. And corporations are flush with cash: The ratio of liquid assets to short-term liabilities is the highest since 1954, based on datacompiled by the Federal Reserve.
“It feels eerily similar to last year, but fundamentally it’s quite different,” said Joseph LaVorgna, chief U.S. economist for Deutsche Bank Securities in New York. He sees the economy growing 3 percent in the fourth quarter from a year earlier, compared with 1.6 percent in 2011.
That’s good news for the stock market and for companies such as Discover Financial Services. (DFS) Net income for the three months ended Feb. 29 rose 36 percent to a record $631 million, or $1.18 a share, the Riverwoods, Illinois-based credit-card issuer said March 22.
“Consumers are continuing to gradually grow their spending,” Chairman and Chief Executive Officer David Nelms said in an interview. “They’ve finished a lot of the deleveraging that they’re going to do on credit cards and auto loans.”